Paul Sanders from Haart Estate Agents in Peterborough talks to the BBC about current conditions in the UK housing market.
32 Cowgate, Peterborough, Cambridgeshire, PE1 1NA
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07:10 Thursday 18th November 2010
Peterborough Breakfast Show BBC Radio Cambridgeshire.
ANDY GALL: To buy or not to buy, that’s the question. Apparently buying a house is more cost-effective than renting a house in eighty per cent of British cities and towns, including Peterborough. That’s according to a property search website zoopla.co.uk, and Paul Sanders is the manager of Haart Estate Agents in Peterborough. We can speak to him now. Good morning Paul.
PAUL SANDERS: A very good morning to you Andy, a very good morning.
AG: So what do you think about these figures then?
PS: Long term, it’s always been .. cheaper is the wrong word to use, but it’s certainly always been more cost-effective to purchase your own home. I think the figures have been accentuated recently, because mortgage rates are at an all-time low. Property prices are extremely price sensitive, to say the least. The price that houses are changing hands at is incredibly low at the moment, so taking into account the low purchase prices, plus the all-time low interest rate, then actually mortgage costs on a monthly basis are as cheap as they’ve been for many many years.
AG: Yes we all know that. You look in the newspapers, and you can see the offers that lenders are giving you. But they’re only giving you decent offers, you’re only getting to enjoy this rarified air of low-interest rates, if you have a big deposit. And people who are renting, more often than not, are people who are probably, generalising but young people who are trying to get the money together to be able to buy a house, and they can’t.
PS: And that’s exactly why this disparity exists. There are lots of people, you hit the nail on the head there Andy perfectly, there are lots of people that want to buy, but there are a lot of people that can’t. So the alternative is they’re going to rent it. They can’t buy because the banks are putting what I consider to be very very unrealistic deposit demands on particularly first-time buyers, to buy a typical two bed terrace in the city now. To rent it, the deposit including costs is probably around the fifteen hundred pound mark, and it’s going to cost you five hundred pounds a month.
AG: Paul. Do you think there’s an argument that some landlords, or landwomen, whatever you want to call them, are exploiting this current situation, where there is this chink in the market where first-time buyers can’t get on the ladder, so therefore they’re raising their prices as well?
PS: Exploiting is probably too strong a word. It’s demand and supply Andy. Any market is driven by two things, A) the demand for that particular product, and B) the supply of the product available. There are for every house that we offer to let, we have seven people fighting over that property. So it’s just market forces. As a result of that, rents are driven up. But of course that has the opposite effect on the residential selling market, because those people that probably would prefer to purchase their own home are almost being forced into the rental market by the unrealistic deposit size demands that are placed on particularly first-time buyers.
AG: So what do you think .. what would you from your perspective, knowing the industry as you do, what do you think should change?
PS: One simple thing. The banks need to release the noose, it’s as simple as that. Once the banks release this ridiculous deposit demand for first-time buyers, that will bring back all the people that want to buy their home, and are perfectly on a monthly basis able to afford to buy their own home, but just don’t have fifteen, twenty thousand pounds sat in the bank. How many of us do, and certainly when we’re at the age of maybe twenty to twenty five, your typical first-time buyer age range? I didn’t have a penny to my name in those days. So the banks need to be far more realistic, I think, on the demands that are faced on the deposit required to secure your first mortgage.
AG: It does smart though doesn’t it? Just look at it from my perspective as well, and most people really. When you do buy a house, and then you see that, hang on a second, we thought we’d enjoy the good times when the interest rates are low, but banks have a sort of threshold that they won’t go below, will they? So most of the banks aren’t actually matching the nought point five per cent. They’re increasing it, so that there’s a watermark of about three per cent in some places. However, if it’s the other way round, and interest rates went up, you can’t turn round and say, could you lower it by the same percentage that you had a shelf the other way. It always seems to be as though .. and we look at it .. I’m not sure in two or three generations time that they’ll look at the way the housing market works now, and think, what were they doing?
PS: Again you’re absolutely right Andy. The banks aren’t offering. Yes interest rates are low right now. Yes they are. And you’re absolutely right. If you have, and if you fit into this compartment of a certain criteria here, A) you have a large deposit, and B) you’re very creditworthy, you could procure a very very attractive mortgage rate. Actually, in the real world, you’re so right. The banks aren’t passing on the nought point five per cent interest rate. If you go and buy a mortgage product, you are paying anywhere between three and five per cent for that product. And actually that’s been the average over the last fifteen twenty years. So you’re absolutely right. The banks aren’t passing on the discounts. But then again, they’re not lending as much, so they have to make as much as they can on the little that they are lending.
AG: They’re not quite being banks, are they? (LAUGHTER) As we like to think of them.
PS: But if you think about it, an interest rate rise wouldn’t actually be a bad thing. Because Mister Grandad and Miss Granny, who have got their hundred grand shoved up in the mattress, if the banks actually increased their interest rates, in many ways it’s my view that that would be a terrific thing for the economy, and naturally help the housing market kick start again. Because we would then place more money with the banks. Because none of us are. None of us are putting our money in the bank. In my branch every day I have people that say I’d like to buy a house where I can rent it out as an investment, rather than put the money in the bank. So none of us are taking our money to the banks any more. And that is having a significant effect, that’s accentuating the fact that they don’t want to lend what little money they do have. Inter-bank lending has virtually stopped, because the banks don’t trust each other any more, after Lehman Brothers in 2007. So actually if interest rates were to rise, and encourage Mister Grandad and Miss Grandma to put their money in the bank, the banks would have more money to lend, and I think we’d actually be a lot better off as a result.
AG: Paul, thank you very much for talking to us this morning. Very interesting to talk to you. That’s Paul Sanders, the manager of Haart Estate Agents in Peterborough.