No second thoughts about second homes
No second thoughts about second homes
Even though interest rates are relatively low at the moment, for many people it’s still quite tricky to get that first step up onto the property ladder. But that combination of price rises and low interest rates has made property an attractive investment in recent times – as we can see in our latest edition of the Aviva Family Finances Report.
House prices have risen over the last few months, and we’ve seen second properties outperforming primary residences in value, thanks to the buy-to-let phenomenon: it’s up by 25 per cent in three and a half years, compared with 10.8% for first homes.
In the more recent edition of our Family Finances Report, eighteen per cent of the families we spoke to said they have a second property of some sort, including buy-to-let properties, holiday homes, timeshares or homes owned jointly with older children.
Let’s get another mortgage
What was even more interesting was that all but two of the family types we tracked said they’d seen their mortgage debts climb over the last six months – single parents, and couples with no plans to have children. We think one of the reasons for the increase is that renewed level of interest in buy-to-let properties.
Our attitudes could be changing towards debt overall, and with the changes in retirement regulation, we ask, ‘will we see a focus on property as a long-term investment as a result?’ It will be interesting to see if the trends in this edition of the Family Finances Report are replicated, in six months’ time.
Let’s be realistic
It’s also worth bearing in mind that the Bank of England recently announced no more than 15 per cent of new mortgages granted by each commercial bank can be at loan-to-income multiples of 4.5 and above. Lenders also have to apply more stringent affordability tests: can borrowers really afford their repayments if interest rates rise from present levels to 3.5 per cent over the next five years? That’s the question.
Whatever the calculations being made by homeowners, in any walk of life, we’d like to think anyone investing in a buy-to-let as a long-term investment strategy is also considering an extension to their life insurance. After all, there’s very little point developing a huge property portfolio if it’s not adequately protected.
“As we’re helping people put all-important protection and life insurance into place, we’re seeing that many families have taken on bigger mortgages, while others lack spare cash to pay down their debts.” Louise Colley, protection director, Aviva.
The Aviva Family Finances Report is an in-depth study into the financial needs of the 84% of the UK population who live as part of a modern family. Based on customer profiles and Government data, Aviva recognises the six most common types of modern family as being:
• in a committed relationship with no plans to have children;
• in a committed relationship with plans to have children;
• in a committed relationship with one child;
• in a committed relationship with two or more children;
• divorced/separated/widowed with one or more child;
• or a single parent raising one or more child alone.
Data was sourced from the Aviva Family Index, using responses from over 22,000 people identified as above, via Canadean research. This report looks at not only personal wealth, income sources and expenditure patterns but also tracks how these change across the different types of family unit.
In each edition, Aviva highlights a different topic. This issue has a focus on the lifestyles and working habits of UK families across different generations over the last 50 years. This ‘spotlight’ section uses data compiled from interviews of parents who had their first child between 1965 and 2014, comparing attitudes of 1,103 parents of Generation X (born 1965-1980); Generation Y (born 1981-2000) and Generation Z (2001-2014).