Mortgage & Financial Services News

Lenders called on to support self build

admin — Tue, 15 May 2012 16:58:35 +0000

UK lenders are being called upon to support the self build scheme following the housing minister’s announcement of a £30m short term finance fund for self build projects.

The self build specialists BuildStore Financial Services welcomed Grant Shapps’ fund but warned that only support from lenders could unlock the market.

Raymond Connor, chief executive of BuildStore, said: “We wholeheartedly support Grant Shapps’ scheme and offer our congratulations to the minster and the independent groups that have campaigned hard for this to happen.

“But for real growth it is about products and margin and risk and without the support of the lenders this important sector of the housing market will struggle to break through to the next level.“

King expects no change to intrest rates ‘through 2013′

admin — Mon, 14 May 2012 09:45:47 +0000

The report said the base rate is projected to remain on hold as the bank uses its quarterly inflation report to cut its forecast for the country’s economic activity and “brace for higher-than-expected inflation”.

IHS Global Insight chief UK economist told the paper: “It is odds-on that the new forecasts contained in the report will be the all too familiar and dispiriting mix of reduced growth but higher inflation expectations.

“We expect it to indicate that interest rates are unlikely to rise from the currently level of 0.5% until at least late-2013, and very possibly not until 2014.”

Interest-only mortgage house arrest

admin — Wed, 04 Apr 2012 09:14:35 +0000

Moneyfacts is warning brokers to alert their clients about the sudden surge in lenders reducing the LTVs on interest-only mortgages to just 50%, placing them firmly out of the reach of the majority of borrowers.

Lenders cite this as “prudent” borrowing but anyone who currently has an interest-only mortgage at a higher LTV than 50% needs to consider their limi…ted options quickly, Moneyfacts said.

The latest changes to interest-only mortgages have seen Abbey, Leeds and Coventry cut LTVs from 75% to 50%, Nationwide cut from 66% to 50%, Newbury cut from 75% to 70%, Skipton from 75% to 60%, Manchester cut from 70% to 60%, Teachers Building Society cut from 70% to 50% and HSBC cut from 80% to 75%.

Sylvia Waycot, spokeswoman at Moneyfacts.co.uk, said: “Problems may arise if clients need to borrow additional money for home improvements, such as building extra bedrooms etc because this will be deemed a new loan.”

Clients in this situation will only be able to borrow around 50% of the house value, which in most cases will be less than the original mortgage.

Waycot added: “The end result is that many people who chose an interest-only mortgage because it was cheaper and are at their maximum monthly outgoings will find themselves unable to move should they need to - they are in fact under a form of house arrest.”

MPC: Markets expect two years of 0.5pc BBR

admin — Wed, 22 Feb 2012 17:51:46 +0000

Minutes of the MPC’s meeting held on the 8th and 9th February also revealed that market participants expected the committee to vote to increase the amount of Quantitative Easing at the meeting.

The MPC said that strains in bank funding markets during the second half of 2011 had begun to feed through into further increases in the cost of credit for some borrowers.

However the committee also said that this had improved since the turn of the year and in time it would allow spreads on interest rates paid by UK households and businesses over risk-free rates to decline somewhat.

Members of the MPC were split on its decision to increase the size of the asset purchase programme, the Bank’s Quantitative Easing programme.

David Miles and Adam Posen voted to increase the amount of QE by £75bn to £350bn

The remaining seven members however all opted to increase the amount by £50bn to £325bn.

The committee was unanimous on its decision to maintain the base rate at 0.5%.

The MPC said the introduction of an additional round of QE was driven by the most recent projections in the February inflation report that, without further monetary stimulus, inflation would undershoot the 2% target in the medium term.

Minutes of the MPC meeting said: “An increase of £50bn in the stock of asset purchases would represent a material monetary stimulus and it was not clear that a stimulus larger than that was warranted at the current juncture.

“In addition, given market expectations, a larger increase risked sending a signal that the committee thought the economic situation was weaker than it was.”

90pc of FTBs have not paid stamp duty

admin — Tue, 14 Feb 2012 17:35:53 +0000

Of the 331,899 first-time buyer loans taken out between the start of the stamp duty holiday on 24 March 2010 and the end of 2011, 89% were for properties priced under £250,000.

Over this period 286,299 first-time buyers bought a stamp duty free property with 159,872 benefitting from the stamp duty holiday by buying their first home priced between £125,000 and £250,000.

This is half of all of those first-time buyers who bought a home over the past two years who would otherwise have been liable to pay the additional tax.

Peter Dockar, head of mortgages at HSBC, said: “We have seen a 20% increase in approvals for first-time buyer loans in the first six weeks of the year as they rush to take advantage of the stamp duty holiday.

“With the deadline fast approaching we will continue to offer a helping hand to first-time buyers.

“As well as offering a number of competitive deals for customers with as little as 10% deposit, we have also committed to making £3bn available to first-time buyers in 2012 whilst also offering a number of fee-free mortgages to help keep upfront costs down.

High LTV lending doubled over 12 months: e.surv

admin — Fri, 10 Feb 2012 09:30:10 +0000

The number of loans for house purchase rose to 58,610 in January, according to the latest Mortgage Monitor from e.surv chartered surveyors.

This is the highest level since December 2009, and e.surv said it was largely down to an increase in lending to borrowers with small deposits. The figure represents an 11% increase on the 52,939 purchase approvals in December, and a 29% year-on-year increase from January 2011.

Since January 2011, high-loan-to-value lending has almost doubled. Loans to borrowers with a deposit of under 15% accounted for only 7% of all loans for house purchase back in January last year, but have risen to account for almost 13%.

This has helped more low income and first time buyers get onto the property ladder, with the number of loans to these borrowers increasing at a faster pace than loans to wealthier borrowers. There were 15,329 loans for purchase of homes costing below £125,000 – typical first time buyers property. This was the highest number since March 2008, and a 31% increase from January last year.

There were fewer loans on expensive property in January than in December, as the number of loans for purchase of expensive property fell in all price brackets over £376,000, suggesting wealthier buyers are beginning to represent a less disproportionately large share of the market.

However, e.surv said that despite the improvement, deposit requirements are still high by historic standards, which mean first-time buyer numbers remain suppressed compared to their pre-2008 levels. In January 2007, the average deposit for house purchase loans was 31%, compared to 38% in January 2012.

Richard Sexton, director of e.surv, said: “The mortgage market has so far done a reasonable job in repelling the onslaught from the eurozone. LTVs have trended steadily upwards over the past six months, and approvals volumes are holding up well. Lenders pushed out a spate of high loan-to-value mortgages in the summer to cater for the backlogged first time buyer market, and, although they have taken time to feed through, we now are we beginning to see borrowers take them up in notable numbers.

“But it won’t last forever. Despite all the encouraging news surrounding the market at the moment, danger lurks just around the corner. The rate at which banks lend to each other – LIBOR – has been creeping upwards. The banks are yet to pass these extra costs onto the consumer, but this is sure to happen, and will come in the guise of higher mortgage rates. If the situation in the eurozone becomes more tumultuous, which looks possible, lenders will batten down the hatches and scale back the amount they lend to first time buyers.

“The early months of 2011 were so weak that the year-on-year growth in January is more an indictment on how suppressed lending was a year ago than it is a sign of a vibrant market. First time buyer numbers are still low by historic standards and buy-to-let lending is forming an increasing share of overall lending.”

Buying 16pc cheaper than renting!

admin — Mon, 30 Jan 2012 16:13:33 +0000

The typical monthly cost of buying a three bedroom house in the UK was £600 in December 2011.

Three years ago the average cost of buying was 29% higher than the average rent paid. But homebuying costs have fallen by more than a quarter since 2008, driven by a decline in the average monthly mortgage payment of nearly a third due to the marked fall in mortgage rates and house prices.

The mortgage rate for a new borrower has been reduced to an average of 3.63% in 2011 from 5.75% in 2008, while the average house price has dropped by 11% over the same period.

The average cost of renting has risen by 9% since 2009. Halifax said the higher demand for rental property, driven partly by the difficulties for potential buyers entering the housing market, has pushed up rents.

Over the past year, buying costs have dropped by 5% whilst the typical cost of renting has risen by 5%, continuing the trends seen in 2010.

Halifax said the number of buyers entering the market has continued to decline despite the improvement in the affordability of buying compared with renting since 2008. It estimated that there were around 510,000 home purchases with a mortgage in 2011: the lowest annual total since 1974 and 6% lower than in 2010.

Much of this decline was attributed to an increase in the size of the deposit required, with the size of the average deposit put down more than doubling over the past decade.

In addition, higher costs relating to moving home such as stamp duty and estate agents fees had also added to the overall cost of home buying.

Martin Ellis, housing economist at Halifax, said: “The affordability gains for buyers relative to renters in the last three years have been significant. The average mortgage payment has fallen dramatically over recent years as a result of falling house prices and mortgage rates.

“At the same time, rents have risen due to strong demand for rented accommodation.

“Nonetheless, despite the improvement in the relative affordability of buying a home, the number of purchasers has continued to fall due to the ongoing challenges in raising a deposit and the considerable uncertainty over the prospects for the UK economy, which have severely constrained housing demand.”

Increased numbers of FTBs in 2011

admin — Tue, 17 Jan 2012 11:26:06 +0000

E.surv chartered surveyors has claimed that first-time buyer numbers rose significantly last year, citing increased LTVs and a loosening of criteria.

According to the firm’s latest Mortgage Monitor, there were 32% more loans with a deposit of 15% or under in 2011 than in 2010, as lending conditions for first time buyers improved. There were 57,301 loans with a deposit of 15% or under in 2011, up from 43,379 in 2010, reflecting the fact more low income buyers were able to get mortgages.

There were 12,343 approvals for purchase of property worth £125,000 or under in December (typical first timer stock), up from 9,873 in December 2010. The average loan-to-value on first time buyer property rose to 69% in December, increasing from 66% in December 2010, as more buyers were able to access higher LTV mortgages.

E.surv said that lending conditions have now eased to their most accessible level since August 2007. In December, the average deposit fell to 38%, down from 41% in December 2010, and fell slightly from November. In 2011 as a whole, the average deposit on a loan fell back from 43% in 2010 to 39%.

In the overall market, loans for home purchase were 3.4% higher in 2011 than 2010. There were 590,733 purchase approvals in 2011, 19,203 more than in 2010.

In December, loans for house purchases were up 19% year-on-year, rising from 42,448 in December 2010 to 50,836. Loans for purchases below £250,000 accounted for almost three-quarters of all loans, compared to around two-thirds in 2009, suggesting wealthier buyers are starting to represent a less disproportionate share of the market, e.surv said. On a monthly basis, purchase approvals fell 4%, reflecting the traditional winter downturn.

Richard Sexton, director of e.surv, said: “The market has defied the wider problems that afflicted the economy in the latter half of last year. The improvement in 2011 is modest, but when taken against the backdrop of the eurozone crisis and turgid economic growth, it’s clear the market demonstrated real staying power last year.

“Banks have made a concerted effort to increase the amount they lend to first time buyers, which is reflected in the big jump in higher loan-to-value lending. They are also supplementing this with more lending to buy-to-let investors.

“But it’s important to keep things in perspective. The gains over 2011 shouldn’t be taken as a portent of a return to the sunnier climes of the pre-2008 market. 2012 will be a difficult year. Banks will pass the increased cost of funding themselves onto the consumer, and will likely focus on hoarding capital rather than new lending. A flat market looks like the best we can hope for.”

Autumn Statement 2011: No stamp duty holiday extensionv

admin — Thu, 01 Dec 2011 14:37:21 +0000

The Autumn Statement said: “The government is publishing analysis showing that the Stamp Duty land tax relief for first-time buyers has been ineffective in increasing the number of first-time buyers entering the market.

“This relief will therefore end on March 24 2012 as planned. The government is instead prioritising more effective measures which provide better value for money as set out in its housing strategy.”

Osborne did not announce any new housing policy but repeated the announcement on its mortgage indemnity scheme to help up to 100,000 people buy homes with 5% deposits.

He also said the government would provide a £400m scheme to kick-start stalled construction projects in England and restated that social tenants could expect up to a 50% discount when buying their homes.

Receipts from the right to buy boost would be reinvested in building affordable housing, Osborne added.

Many industry firms and organisations including the Council of Mortgage Lenders and Legal & General will be disappointed with Osborne’s failure to deliver a SDLT holiday extension.

Autumn Statement 2011: UK borrowing rates will hit mortgage costs

admin — Thu, 01 Dec 2011 14:36:17 +0000

In his Autumn Statement today he said: “Just a 1% rise in our market interest rates would add £10bn to mortgage bills every year.

“1% would mean the average family with a mortgage would have to pay £1,000 more.”

Osborne said the UK was paying less than 2.5% on 10-year gilts while Italy was paying 7.2%.

He added: “Last April, the absence of a credible deficit plan meant our country’s credit rating was on negative outlook and our market interest rates were higher than Italy’s.

“Eighteen months later and we are the only major western country which has had its credit rating improve. Yesterday, we were even borrowing money more cheaply than Germany.”

Osborne added that the cost of slowing down Britain’s debt-cutting plan would risk pushing up the rates we have to pay.

He added: “Italy’s rates have gone up by almost 3% in the last year alone. We will not take this risk with the solvency of the British economy and the security of British families.”

Osborne said the debt interest paid by this government was £22bn less than predicted as a result of low rates