Posts tagged ‘mortgages’

Mortgage affordability deteriorates for first time buyers

Mortgage advances to people buying a house fell for the first time in five months during August in a further sign that the property market is slowing down, figures revealed today.

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A total of 65,400 loans were advanced to homebuyers in August, 3 per cent less than in July, according to the Council of Mortgage Lenders.

But despite the month-on-month dip, lending levels were still 8 per cent higher by number and 19 per cent higher by value than in the same month of 2013, making it the best August for house purchase lending since 2007.

The drop was most marked among first time buyers, with 28,900 mortgages advanced to people buying their first home in August, 4 per cent less than in July andthe first fall since January this year.

Affordability for first time buyers is becoming increasingly stretched on the back of recent strong house price gains, with the average person getting on to the property ladder borrowing 3.42 times their income, up from 3.37 times their pay 12 months ago.

The deterioration in affordability came despite the fact that the average amount first time buyers borrowed dropped to £126,198 in August, down from £127,500 in July.

But record low interest rates ensured repayments remained affordable, with first time buyers typically spending 19.7 per cent of their total pay on capital and interest mortgage payments, still significantly below the recent peak of 24.8 per cent reached in December 2007.

There was also a dip in remortgage activity during the month, although this is not unusual for the time of year.

There were 4 per cent fewer loans advanced to people moving to a new deal compared with July, while there was also an 11 per cent fall year-on-year.

Paul SmeePaul Smee, director general of the CML, said: “The lending climate had a glass half full, glass half empty feel about it in August.

“On the one hand it saw a decline in all lending types month-on-month, which would suggest a levelling off of the market.

“Yet, on the other hand, we saw the highest August house purchase lending levels since 2007, and the recent Bank of England Credit Conditions Survey expects an upward trend in remortgaging in the final months of the year.”

Mark HarrisMark Harris, chief executive of mortgage broker SPF Private Clients, said it was “curious” that remortgaging levels remained so weak despite the historically cheap rates currently available.

He said: “As these are not proving enough of a draw, it is unlikely that numbers will flock to remortgage until an interest rate rise is imminent.

“Some borrowers may be concerned about their ability to remortgage given the new affordability criteria and may find themselves stuck on their lender’s standard variable rate when rates do start to rise.”

The data came as the Royal Institution of Chartered Surveyors said the steam appeared to be coming out of the British property market as demand from potential buyers fell for the third month running, while the number of homes on the market remained broadly flat.

The group said house price momentum slowed to its lowest level since June 2013 in September, with surveyors predicting house prices will rise by 2.1 per cent during the coming year.

Recent house price growth has left the average British home costing £266,976, according to Zoopla.

October 9, 2014 at 11:10 AM Leave a comment

Five-year fixed rate mortgages for less than 3%

The cost of fixed rate mortgage deals is continuing to tumble as lenders compete for business, figures showed today.

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A number of banks and building societies are offering five-year fixed rate loans for less than 3 per cent following a slew of price cuts.

The average cost of a five-year deal now stands at just 4.08 per cent, down from 4.16 per cent at the beginning of September, according to financial information group Moneyfacts.

The fall comes despite the fact that five-year swap rates, upon which the loans are based, have actually increased by seven basis points during the period, in anticipation that the Bank of England will start to hike the official cost of borrowing soon.

Instead, the drop in rates is being driven by lenders competing for business, as they look to fill their annual mortgage quotas before the end of the year.

Chelsea Building Society, Tesco Bank and Yorkshire Building Society all currently have five-year fixed rate mortgages with sub-3 per cent rates.

Chelsea Building Society leads the field with a 2.85 per cent deal for people borrowing up to 65 per cent of their home’s value who pay a £1,545 fee.

For those looking to borrow 75 per cent of their home’s value, Tesco Bank is offering a rate of 2.99 per cent with a £1,495 fee.

Charlotte Nelson, of Moneyfacts, said: “Due to base rate speculation there has been volatility within the fixed mortgage market.

“However with many now predicting a later than first thought base rate rise, some providers have reduced their mortgage rates.

“As we are coming close to the end of the year, many banks and building societies are looking closely at their lending targets and the quickest way to get business is to reduce rates.”

The cost of two-year fixed rate mortgages has also fallen, with average rates dropping to 3.51 per cent, down from 3.78 per cent.

Chelsea Building Society also has the best deal for a two-year loan of 1.55 per cent, with a £1,545 fee for loan to value ratios of up to 65 per cent.

It is closely followed by Tesco Bank, which has a rate of 1.69 per cent for an LTV of 60 per cent and a £1,495 fee.

Virgin Money recently became the only lender to offer a six-year fixed rate mortgage, offering a rate of 2.99 per cent. But the deal was withdrawn following very strong demand.

The Bank of England is widely expected to start raising interest rates in the first quarter of next year, although two members of its Monetary Policy Committee have already voted for a hike.

Last week Governor 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”.

October 1, 2014 at 11:22 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

UPDATED: Number of homes changing hands falls to new low

The number of mortgages approved for house purchase fell in August as the property market continued to show signs of slowing down, figures revealed today.

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A total of 41,588 loans were approved for people buying a home during the month, 3 per cent fewer than in July and 5 per cent down on the recent six month average.

There was also a fall in the value of mortgages approved for house purchase, with £6.7bn worth of loans in the pipeline, down from £7bn in July, according to the British Bankers’ Association.

Other data showed that the number of homes changing hands in August fell to its lowest level since November last year, according to HM Revenue & Customs.

An estimated 99,930 properties worth more than £40,000 were sold in the UK in August on a seasonally adjusted basis, down from 101,670 in July, although on a non-seasonally adjusted basis there was a slight increase in sales.

Mortgage advances reached £11.1bn in August, 15 per cent higher than in the same month of 2013.

But the BBA pointed out that the rate of annual increase has been slowing in recent months, while total advances were also down on the recent six month average.

Mortgage lending looks set to slow further going forward, with the number of loans approved for both people remortgaging and those releasing equity also down.

Pipeline loans for people remortgaging dropped to 19,178, 16 per cent down on August last year, while approvals for equity release mortgages dived by more than 30 per cent year-on-year to 6,252.

September 23, 2014 at 10:15 AM Leave a comment

UPDATED: Mortgage lending beginning to show signs of slowing down, says CML

Mortgage lending fell during August in a further sign that the property market is beginning to slow down, figures showed today.

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A total of £18.6bn was advanced during the month, down from £19.7bn in July, according to the Council of Mortgage Lenders.

It was the first monthly drop in mortgage lending since February, when the market was affected by lenders gearing up for the introduction of new regulations under the Mortgage Market Review.

But despite the dip, total advances were still the highest for August since 2008, and 13 per cent up on lending for the same month of 2013.

Bob PannellCML chief economist Bob Pannell said: “The narrative of recovering house purchase and buy-to-let activity continued through August.

“However, it is important to be aware that this picture is being flattered by strong seasonal factors through the summer period.

“A gentle slowing of lending activity may now be in prospect, as a result of the continuing impact of tighter lending rules and a softening of the London market.”

He added that on a seasonally adjusted basis, total lending during July was £17.1bn, little changed from May and June and broadly flat since the beginning of the year, and forward estimates suggest August’s figure will be similar on a seasonally adjusted basis.

The CML’s suggestion that mortgage lending may have reached a plateau is consistent with a report from the Bank of England yesterday, in which agents said housing market activity has stabilised at a lower level than was seen at the start of the year.

Recent data has pointed to a fall in demand from potential buyers as people have become put off by the high prices being demanded by sellers and the prospect of interest rate rises.

At the same time, there has been an increase in the number of homes being put up for sale, helping to ease the mismatch between supply and demand.

Meanwhile, Virgin Money has launched a new six year fixed rate mortgage, undercutting many five year fixed rate deals.

The loan, which is the only six year product available, charges interest of 2.99 per cent to people with a 30 per cent deposit who pay a £995 fee.

The only medium-term deal offering a better rate is a five year fixed rate loan from Yorkshire Building Society at 2.89 per cent, but it requires a 35 per cent deposit and comes with a £975 fee.

Virgin Money said it had launched the deal to give people a “prolonged period of certainty” for the cost of their monthly mortgage repayments.

It added that it expected the product to be very popular, so it was likely to be available for only a limited period.

A flurry of lenders have cut the cost of their five year fixed rate deals in recent weeks in response to falling swap rates, upon which the deals are based.

The average interest rate charged on a five year fixed rate deal has dropped to 4.11 per cent, down from 4.21 per cent in August, according to financial information group Moneyfacts.

Mark HarrisMark Harris, chief executive of mortgage broker SPF Private Clients, said: “As we move into autumn, lenders have one eye on their year-end figures and are ramping up their lending volumes to meet them.

“Subsequently, there are some excellent fixed rates available over two and five years so borrowers who are concerned about rate rises should act now to obtain some security.”


September 18, 2014 at 10:03 AM Leave a comment

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