Posts tagged ‘Bank of England’

Mortgage availability drops to lowest level since the credit crisis

Mortgage availability fell to its lowest level since 2008 during the summer as banks tightened their lending criteria, an official report showed today.

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Lenders reported a significant drop in their willingness to advance loans during the three months to the end of September, ending eight consecutive quarters during which the availability of home finance had improved.

The fall in lending was driven by banks and building societies changing their appetite for risk and having lower expectations for house prices, according to the Bank of England.

In its Credit Conditions Survey, it added: “Many lenders noted that operational issues associated with the implementation of the Mortgage Market Review had pushed down on credit availability over the summer.”

A number of players also said they had also tightened their lending policies in response to recommendations made by the Financial Policy Committee to help mitigate the risks to the economy that came from a booming housing market.

But despite the dip in mortgage availability during the summer, lenders were confident home loans would become more readily available during the final three months of the year, as they strove to hit their market share targets.

Mortgage availability fell for all loan-to-value ratios, including for those borrowing less than 75 per cent of their home’s value.

Lenders also said they had become less willing to advance money to people with deposits of 10 per cent or less for the first time since the question was introduced in 2013.

Some groups added that they had also introduced policies that restricted lending to people wanting to borrow high loan to income ratios, while many had tightened their credit scoring criteria, leading to a fall in the number of mortgage applications that were approved.

The fall in mortgage availability was matched by a slide in demand during the summer as the booming housing market showed signs of cooling down.

Lenders said demand for home loans fell significantly during the three months, ending the trend seen since the beginning of 2012.

Going forward, mortgage applications are expected to pick up again during the final part of the year, both among those looking to purchase a new home and people remortgaging ahead of a future interest rate rise.

But despite banks and building societies being less willing to lend during the third quarter, the mortgage market remained competitive, with the difference between the interest rates charged to homeowners and the Bank Rate or swap rate upon which the loans are based, narrowing.

This trend is expected to continue during the fourth quarter as banks and building societies compete to meet their lending targets before the end of the year.

There was also a significant fall in the number of people defaulting on their mortgages during the three months to the end of September, and lenders expect a further improvement during the final part of the year.

Recent economic data has already picked up the slowdown in both the mortgage market and the property one.

But Matthew Pointon, property economist at Capital Economics, expects lending to rebound during the fourth quarter, driven in part by higher demand.

He said: “A significant balance of lenders expect to raise the availability of credit over the next three months.

“Furthermore, the demand for mortgages is predicted to rise, and a balance of 10.8 per cent of lenders expect to approve a larger share of applications.

“That is the second largest expectations reading since the survey began in 2007, and points to a recovery in mortgage lending in the final quarter of the year.”

October 7, 2014 at 11:41 AM Leave a comment

UPDATED: Mortgage approvals drop to lowest level in a year

The number of mortgages approved for people buying a property fell for the second month running in August, figures showed today.

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A total of 10,357 loans were in the pipeline for house purchase during the month, down from 10,703 in July, according to the Bank of England.

It was the lowest monthly figure since September last year, with the exception of April and May, when the market was disrupted by the introduction of tough new lending criteria under the Mortgage Market Review.

The data adds to growing evidence that the booming property market is beginning to cool, as buyers become more cautious in the face of recent strong house price gains and the prospect of future interest rate rises.

mark_carneyBank of England Governor Mark Carney warned last week that the point at which interest rates would start to rise from their current record low of 0.5 per cent was “getting closer”.

Total mortgage advances increased slightly during the month, rising to 17.46 billion, up from 17.2 billion in July.

The figures came as the National Association of Estate Agents warned that the younger generation continued to be squeezed out of the property market.

The group said the number buyers aged between 18 and 30 remained at an all-time low of just 3 per cent of sales in August.

There was some good news, with the proportion of sales accounted for by people buying their first home rising to 28 per cent during the month, the first increase since April and up from just 20 per cent in July.

But the majority of people getting onto the property ladder are thought to be aged aged between 31 and 40, with this age group accounting for 45 per cent of all sales, the highest proportion ever recorded for August.

Mark HaywardMark Hayward, managing director of the National Association of Estate Agents, said: “Reports from our NAEA members suggest that the high house prices of the current housing market are still proving a barrier for the younger generation.

“It is evident that first-time buyers are indeed getting older, with the majority of home buyers this month aged 31 to 40, suggesting some correlation between the increase in the first-time buyer market and this age group.”

The number of properties for sale fell slightly during August, dropping to an average of 49 per estate agent branch, down from 51 in July.

There was also a dip in the number of sales agreed, with transactions falling to an average of eight per branch in August, compared with nine the previous month.

But there was an increase in the number of people looking to buy a home, bucking the recent trend, with 372 house hunters registering with estate agents, up from 368.

But nearly 90 per cent of estate agents think the expected increase in interest rates will affect demand for property, with 39 per cent of agents saying they have already seen a cooling.

Meanwhile, the Government has announced plans to extend the Help to Buy scheme to enable more young people to get on to the property ladder.

It said first-time buyers aged under 40 would be offered discounts of 20 per cent on 100,000 new build homes.

The discount will be made possible by releasing brownfield sites to builders and exempting them from certain taxes.


September 29, 2014 at 9:59 AM Leave a comment

House prices continue to rise as Bank of England warns interest rates are ‘to begin to increase’

House prices jumped by 1 per cent in August defying signs that the property market was beginning to slow down, figures showed today.

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The average cost of a home in England and Wales rose to £177,824 during the month, 8.4 per cent higher than in the same month of 2013 and within touching distance of the pre-crisis peak of £181,383.

Strong gains in London continued to drive the rest of the property market, with house prices in the capital soaring by 2.7 per cent to stand at £467,070, 21.6 per cent higher than a year ago, according to the Land Registry.

The housing boom is rippling out from London to other parts of the country, with the South East posting growth of 1.7 per cent, while prices were 1.6 per cent higher in Yorkshire and Humberside and 1.5 per cent up in the East.

But growth remained subdued in other regions, with property values creeping ahead by just 0.1 per cent in both the South West and North West, and by 0.2 per cent in the West Midlands.

Meanwhile, more than 37 properties a day changed hands for more than £1m in June, the latest month for which data is available.

A total of 1,135 homes were sold for at least seven figures during the month.

The Land Registry data comes as Governor of the Bank of England Mark Carney warned that the point at which interest rates would start to rise from their current record low of 0.5 per cent was “getting closer”.

Speaking at a conference, Carney said leaving interest rates low for too long could lead to other risks building up in the economy, with the housing market currently posing the biggest threat.

He said: “Relative to the recent past, the economic outlook is much improved.

“While there is always uncertainty about the future, you can expect interest rates to begin to increase.”

But he added that when rates did start to increase it would gradual, and the Bank Rate was likely to peak at below pre-crisis levels.

Economists expect the first increase in interest rates to be made in early 2015, although two members of the Bank’s Monetary Policy Committee have already voted for an increase.

For homeowners who are keen to lock into low interest rates, there are a number of competitive mortgage deals on the market.

Norwich and Peterborough Building Society has a two-year fixed rate deal at 1.89 per cent for people with a 35 per cent deposit who pay a £195 fee.

Those who want the security of a longer deal can get a five-year fixed rate loan at 2.89 per cent from Yorkshire Building Society, which comes with a £975 fee.

Today’s Land Registry figures contradict growing evidence that the housing market is beginning to slow down, although the Land Registry data, which is based on completed sales, tends to lag other indexes.

Mortgage lender Halifax said property values crept ahead by just 0.1 per cent in August, while the annual rate of growth also slowed.

Data from the British Bankers’ Association also showed a 3 per cent fall in the number of mortgages approved for house purchase in the month, compared with July.

Strong house price gains have left the average British home cost £265,022, according to Zoopla.

September 26, 2014 at 2:25 PM Leave a comment

Homeowners prepare for interest rate rise

Homeowners are prepared to cut back on spending to ensure their mortgage repayments remain affordable when interest rates start to rise, research showed today.


Around 39 per cent of people said they would reign in their spending on non-essential items, such as holidays, eating out and buying gadgets, if their mortgage rate increased.

A further 20 per cent admitted they may have to make cuts on essential spending, such as food and clothes, according to a report by the Building Societies Association and the Money Advice Trust.

But 30 per cent of people said they would not need to make any changes in order to meet their mortgage repayments.

The Bank of England is widely expected to start raising interest rates from their record low of 0.5 per cent in the first quarter of next year.

Many homeowners have financial strategies planned to ensure a hike in mortgage rates does not come as a shock.

One in five people said they would remortgage on to a cheaper deal, while 12 per cent said they would work more hours and 10 per cent said they would pay off a lump sum of their mortgage to reduce monthly repayments.

Around 19 per cent of people said they would put major spending plans, such as home improvements, buying a new car or trading up the property ladder, on hold while they adjusted to a higher interest rate environment.

A further 6 per cent of people said they would consider downsizing to a cheaper property.

Overall, just 7 per cent of homeowners said they would be in serious financial trouble if interest rates change as they expect during the coming three years, while 20 per cent said they may be in slight trouble.

Just over half of people said they thought the Bank Rate would still be only 2 per cent or less by 2017.

But Bank Governor  has indicated that the official cost of borrowing is likely to rise to around 3 per cent in the long-term, although he has stressed that any rate hikes will be gradual.

Paul BroadheadPaul Broadhead, head of mortgage policy at the Building Societies Association, said: “Our advice to those concerned about interest rate rises is to start thinking about how they will manage the increased costs.

“This could include creating a household budget, to taking a look at mortgage calculators and rescheduling unsecured loans such as credit cards.”

For homeowners who want to remortgage, there are some highly competitive rates available as lenders look to fill their mortgage quotas before the end of the year.

Norwich & Peterborough Building Society has the best two-year fixed rate loan available at 1.89 per cent for people borrowing up to 65 per cent of their home’s value who pay a £195 fee.

Yorkshire Building Society leads the way for those wanting to fix for five years, with rate of 2.89 per cent, although borrowers will need a 35 per cent deposit and will have to pay a fee of £975.

September 24, 2014 at 11:06 AM Leave a comment

Ten house buyers ‘chasing’ every property for sale

There are nearly 10 buyers chasing every property for sale, despite a jump in the number of homes on the market, research showed today.

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The number of properties listed with estate agents rose by more than 4 per cent in August, compared with the same month of 2013, as homeowners looked to cash in on recent house price gains.

At the same time, the number of potential buyers fell by 5.5 per cent, according to estate agents haart.

The group said the figures suggested the property market was rebalancing following a year of high demand and low supply.

But despite the fall in people looking to buy and the rise in homes for sale, the market remained highly competitive, with 9.5 potential buyers chasing every property.

The increase in supply helped to boost sales levels, with transactions rising by nearly 9 per cent year-on-year.

Paul SmithPaul Smith, chief executive of haart, said: “The property market is currently recalibrating as our data shows, with an easing of demand as new buyer registrations across the UK decrease 5.5 per cent annually, in contrast to the uplift in homeowners looking to sell.

“Despite this influx of stock the market remains competitive with an average 9.5 buyers registering interest in every new home that comes to market, which is the driver behind property price growth.”

He added: “This gradual return to normality should now dispel fears about property bubbles – which we have always dismissed as hype.”

The group said house prices had risen by 8.9 per cent in the year to the end of August, to stand at an average of £206,578.

But the typical price paid by a first time buyer actually dipped slightly during August, dropping to £153,967, 1 per cent lower than in July.

London continued to be the main driver of growth, with prices storming ahead by 23.6 per cent year-on-year in the capital to stand at £494,026.

Competition for property was most intense in London, with 15.7 potential buyers chasing every home on the market, despite a 27 per cent jump in supply.

Meanwhile, the Bank of England reported that housing market activity had stabilised at lower transaction levels, after dipping earlier in the year following the introduction of tougher lending criteria under the Mortgage Market Review.

In its Agents’ Summary of Business Conditions Report, it said the slowdown had been particularly marked in Central London, where the appreciation of sterling had deterred some foreign buyers.

It added that house price growth was also slowing, particularly in areas of the country that had seen significant gains, with estate agents saying this reflected a more balanced market, as supply increased.

The Bank’s Monetary Policy Committee also struck a more dovish tome in its September meeting, with members suggesting Britain’s recovery may slow in the fourth quarter, while risks from the problems in the Eurozone have increased.

Two members continued to vote for a rate hike, but they failed to persuade any other members of the committee that a rise in the official cost of borrowing was necessary.

Most economists expect the Bank Rate to be increased from its record low of 0.5 per cent during the first quarter of 2015.

September 17, 2014 at 11:24 AM Leave a comment

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