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The Nationwide Building Society, who have been at odds with house price figures from other sources in the past have backed up the overall view that the market is in decline. The Society showed that property prices across the UK fell by 0.4% in September to an average figure of £163,964 and that the annual rate of decline now stands at 1.4%.
These statistics represent a small drop from that reported in August although the overall pattern will be causing concern in some quarters. However, the Nationwide are another organisation who are hopeful that the new Funding for Lending Scheme (FLS) will shortly start to show a positive impact on the housing market.
Robert Gardner, Chief Economist at Nationwide said that the market had “been impacted by a number of one-off factors this year, such as the ending of the stamp duty holiday that cannot be controlled by the usual process of seasonal adjustment”.
“For this reason the annual rate of house price change is a better guide to the state of the market at present. On that basis, the housing market remains fairly stable, with prices 1.4% lower than September 2011.”
Nationwide were one of the first mortgage lenders to sign up for the FLS and while they remain firmly behind the scheme, Mr Gardner warned that other factors were of equal importance if the property figures were to experience a sustained rise.
“Labour market developments will remain of paramount importance in deciding the trajectory of house prices. There are grounds for caution on this front, as the unusual combination of rising employment and declining economic activity that was evident in the first half of 2012 is unlikely to be sustained,” he added.
Once again, regional variations in the market vary wildly. At the top of the list, the average price of a property in London is now £301,168 while in Northern Ireland that average drops right down to £107,719.
“London continues to defy economic logic. To be just 2% below its peak in a paralysed economy is preposterous,” said Russell Quirk, of estate agents eMoov.co.uk.
Mr Quirk was also sceptical over the FLS, suggesting that it would not filter through to first time buyers and make a significant difference.
“I’m less confident than the Nationwide that the Funding for Lending scheme will have a major impact. Yes, it may make credit more available and cheaper, but will it get through to the people who need it?
“Cheap and available is idle chatter if it’s not getting through to higher loan-to-value borrowers,” Mr Quirk concluded.
The office for National Statistics (ONS) has revealed what some believe to be worrying figures in regards to the number of 30 year mortgages currently being taken by new borrowers. The statistics also show that the 25 year deal, which is still seen as the standard term, is dwindling fast.
The ONS’ figures show that 23.3% of all new mortgages are now spread over a thirty year period. Meanwhile, the 25 year term, which accounted for 70% of the overall market in the 1990’s, has fallen to around a 30% share.
The thirty year mortgage numbers have increased since the financial crash back in 2008 and at that stage, borrowers seemed more concerned about taking on more debt over a longer period of time. In the four years that have followed however, mortgage affordability has been one of the factors behind the steady rise.
Bob Pannell, chief economist at the Council of Mortgage Lenders confirmed that the rising costs of home loans were a main contributory factor. Elsewhere, some property experts are concerned at a repossession time bomb that is currently ticking due to homeowners deferring debt in the short term.
Meanwhile, the question of overall mortgage availability has also been highlighted by these figures and in a survey carried out by Canadean Consumer for the Building Societies Association (BSA), it was shown that financing and general availability of home loans was improving.
“Results from our Property Tracker report indicate that the barriers to purchasing property may be largely down to perception, rather than actual experience,” said Paul Broadhead, head of mortgage policy at the BSA.
If, as Mr Boradhead suggests, there is an issue with the public’s perception of the mortgage market, is there a significant proportion of borrowers who are taking out 30 year mortgages unnecessarily?
Meanwhile, there have been several stories highlight beneficial rates from some of the lenders but the issues over raising deposits for first time buyers (FTB’s) still remain. A recent survey has shown that around 47% of FTB’s believe that it will take them ten years or more to save sufficient funds for a suitable deposit.
“Prospective first-time buyers believe they will be 35 years old by the time they get on the housing ladder,” said John Willcock, head of Post Office Mortgages.
As always, there is mixed news for borrowers but it does seem that those who are remortgaging or who have a sufficient deposit for a new home, may have more choice from the market than they may think.
With Santander set to increase their Standard Variable Rate (SVR) Mortgage next month, it may already be too late to take advantage of the lender’s lower option but, according to industry experts, there are some attractive alternatives on the market.
The levels at which the banks lend to one another (swap rates) are very low and in turn, this has led to a number of impressive remortgage deals. Providing the financial penalties for transferring your mortgage are either low or non-existent, these deals could be well worth considering.
“Swap rates are very low, which has led to fixed-rate mortgages improving significantly in recent months,” said David Hollingworth of London and Country Mortgage Brokers.
Mt Hollingworth went on to advise anyone facing an increase in their SVR to consider a transfer as soon as possible.
“Getting a mortgage offer can take at least a couple of weeks, and often more for those lenders with the best rates as they deal with higher volumes of business,” he added. “It therefore makes sense to get the ball rolling sooner rather than later and to be sure to provide any supporting documentation promptly to ease the process.”
New boys Tesco Bank are offering a 3.39% fixed rate while HSBC have a tempting tracker which as set of 2.14% above the Bank of England base rate for the life of the mortgage. Fees and minimum deposits are naturally involved and it is always advisable to check these but for anyone in a position to remortgage there are plenty of options around.
As far as new mortgage lending is concerned, figures released at the end of August showed an increase in approvals of around 44,000 from June to July amidst claims that the market remains subdued.
“The month-on-month numbers jump up and down but the overall trend is one of extremely low borrowing levels and a market that’s flatlining,” said Ashley Brown of mortgage broker Moneysprite.
With swap rates continuing at low levels, perhaps those month-on-month numbers may start to reveal a steady increase from this point onwards.
There was more bad news for homeowners and potential property purchasers alike when Santander announced an increase to its Standard Variable Rate (SVR) last week. That increase was, in percentage terms, quite significant with the rate changing up to 4.74%.
Santander claim that the rate change will add around £26 a month to a £100,000 mortgage but insisted that it had no further plans to increase the SVR again. The rise will affect all existing Santander customers along with those acquired from other providers with the exception of Alliance and Leicester. It’s thought that the move will see an increase in monthly payments for a ‘few hundred thousand customers’.
“For the last three years the amount it costs us to provide mortgages and the rates we offer our savings customers have been increasing, despite the base rate remaining static,” a Spokesperson for Santander said.
“Additionally, the cost of running a bank in the UK has increased dramatically through a combination of increased liquidity, capital and funding requirements,” the company added.
Santander have, however, been accused of profiteering by some who have deemed the increase unnecessary. It’s been suggested that this was a profitable area for the lender and they have merely increased their SVR in order to take further advantage.
Mark Harris of SPF Private Clients said that this was ‘profiteering, pure and simple’.
“The move puts its SVR towards the upper end of the scale when compared with other big lenders such as Halifax, Woolwich and Nationwide,” Mr Harris added.
Following the increase, advice has come from many quarters, urging those affected to shop around. For those in a variable rate mortgage with no penalties for settlement, such a move could bring monthly payments back to more affordable levels.
“Any homeowners worried about their mortgage payments should make sure they do their homework to make sure they get the best deal possible to suit their needs,” said Michael Ossei of financial comparison site uSwitch.
Mr Ossei also warned that further hikes in the SVR from other lenders were likely.
“This latest increase should serve as a warning that mortgage payments could go up at any time and with very little notice. If you are enjoying lower mortgage payments at the moment it may be worth overpaying, or putting aside the extra cash you’re saving while rates are so low. And although it may be another year or more before the base rate rises, the only way for mortgage rates to go in the long term is up,” he concluded.
Fixed rate mortgages had dominated market news in recent weeks as HSBC, Nationwide and Santander had slashed their rates and offered products under 3% for the very first time. In an unexpected twist however, one of those key products has now been withdrawn.
HSBC’s five year fixed deal was released just four weeks ago but the bank has announced that it is being removed from the market. The 2.99% fixed offer was the first of the sub 3% products to emerge and was therefore responsible for starting the price war, but as of the 16th August, it is no longer available.
While the mortgage was the lowest fixed rate to hit the high street, it did require borrowers to find a minimum 40% deposit in order to secure the deal. Santander, Nat West and Nationwide were swift to follow with differing rates and terms and while the deposit requirements had still to be lowered sufficiently to help the majority of first time buyers, the moves were welcomed.
HSBC have insisted that this was always likely to be a limited time offer and that the product has been withdrawn simply because all of the funds allocated to it have been lent out to home buyers.
“It was designed to bring in business – we knew it would be popular,” a spokesperson said.
Reaction to the news has been mixed but some mortgage brokers have highlighted the fact that while the price war may have grabbed the headlines, it was irrelevant for first time buyers along with many others.
“While a mortgage rate war has broken out in recent weeks, with five-year fixes in particular falling to record lows, these are available only to those with sizeable deposits of at least 40pc,” said Mark Harris of SPF Private Clients.
“First-time buyers with modest deposits continue to pay a premium on the rate, even though they can least afford it. For example, the best five-year fix for a buyer with a 5pc deposit is at 5.99pc from Leeds Building Society.”
David Hollingworth of London and Country Mortgages added,
“Despite improving rates the mortgage market remains constrained and so meeting credit scoring requirements can still pose problems.”
Meanwhile, there are no suggestions that other lenders are going to follow HSBC’s lead and withdraw their lowest fixed rate products from the market. HSBC themselves still offer fixed rates starting from 3.29% so while this is another story that’s taken more than its fair share of column inches, it seems to have little effect on the majority of potential borrowers.
Everyone has heard about the bank of Mum and Dad but there are fears that first time home buyers are skipping a generation and looking to their Grandparents for help with funding their purchase.
These concerns have arisen after reports that the sale of Equity Release products has soared in the six months from January to June of this year. The increase equates to a rise of over 10% from the same period in 2011.
During the first half of 2012, the Equity Release Council report that some £424 million was freed up with 31% of those surveyed stating that the money was to be distributed among their loved ones. With young first time buyers struggling to raise a deposit in order to get onto the property ladder, much of this money is being utilised in this way.
Dr Ros Altman, Saga’s Director General put the issue in blunt terms when she stated that the elderly are living longer and their grandchildren are having to wait longer for their inheritance as a result.
‘The last thing you want as a grandparent is for your children and grandchildren to be thinking, “When is granny going to pop off so I can get my hands on the house?” She said.
Among the concerns expressed by some observers is the theory that many who enter into the schemes are not fully aware of the process and how it works. While the debt involved is only repaid upon death, the outstanding amount can double every eleven years.
With that in mind, the Consumer Credit Counselling Service has advised the elderly to consider their own futures and the potential issues involved before entering into any Equity Release scheme.
‘While equity release to help children or grandchildren get on the property ladder or pay for their education can be gratifying for many, it can be a huge burden for others,’ a spokesman said.
‘There are a lot of costs associated with getting older, and it is crucial that these are factored in to any decisions about equity release.’
Andrea Rozario, director general of the Equity Release Council concludes by asking anyone currently considering an Equity Release product to take independent advice before making the final decision.
‘Advisors are incredibly important when it comes to equity release as not only will they help the consumer to decide if equity release is right for them, but also make sure that they are getting the benefits they are entitled to,’ she said.
In recent weeks we’ve looked at many surveys in different parts of the property sector and one of the common themes is the difficulty young people face in buying a property. Organisations such as Shelter have called on more efforts by the government to address issues within the rental market while it’s also being suggested that young people are being forced to stay home for much longer than they would prefer.
Figures released by the Bank of Scotland this week are now stating that the majority of parents are now fully aware that they will need to provide assistance if their children are to stand any chance of getting onto the property ladder.
The findings show that 55% of those surveyed believe it to be essential that they offer a financial hand in this type of situation but the numbers of prospective property purchasers seeking that help has risen dramatically.
The survey concentrated on those between the ages of 18 and 34 and it found that while around 61% were looking for home buying aid from their parents in the 1980’s, that figure had shot up to 84% in the present day. Additionally, it was also found that 30% of young people were receiving aid from their parents to pay rent as opposed to 8% some thirty years ago.
“Much has been said about the bank of mum and dad in relation to the cost of getting on the housing ladder, but it is clear Scottish young adults rely on financial support from their parents for a lot more than this,” said Greg Coughlan, head of savings at Bank of Scotland.
While that quote may mention Scotland specifically, the survey took in 1500 young adults from across the UK so it’s clear that this is a nationwide issue. Aside from buying a first property, those surveyed said that they were also looking for parental aid to pay for other essentials such as a car and university fees.
A separate poll carried out by Post Office Mortgages looked to underline how keen young people were to get onto the property ladder. The survey said that 36% of males and 32% of females aged between 18 and 34 were hopeful of buying a property in the near future.
“All first-time buyers need to make sure they don’t compromise on getting the right mortgage to help them get on the property ladder,” said Mike Cook head of mortgages at the post office.
Mr Cook also went on to suggest that FTB’s should also look at saving a 10% deposit but that is precisely the problem that is seeing those prospective purchasers look to their parents for financial aid in the first place.
Advice coming from a proportion of mortgage experts suggests that potential buyers should be looking to arrange a mortgage before the market seizes up. The claims come in the wake of moves by Santander to drastically reduce its lending for the near future.
The bank has allegedly dropped its share of the lending market through brokers from 25% to 14% in recent months and the concern from everyone’s point of view is that nobody is stepping in to fill that void. The end result could be that lending grinds to a halt bringing the property market to a complete standstill.
In contrast with these claims, figures from the Council of Mortgage Lenders (CML) showed that mortgage lending surged in March but brokers have recently been suggesting that there has been a slowing of this market for some considerable time now.
“Both confidence and funding could be affected by the renewed eurozone uncertainties, so the underlying picture of a relatively quiet mortgage market seems likely to persist for some time,” said Bob Pannell, Chief Economist at the CML.
There are, of course, many lenders who are currently increasing rates and adjusting their selection criteria so why are Santander being singled out? It seems that the bank have been such a major home loan provider since the Credit Crunch back in 2008 that their absence from the market today is being keenly felt.
Ray Boulger of John Charcoal Mortgage Brokers revealed that 10% of his company’s business was placed with Santander in 2011 and that figure stood at 11.5% at the beginning of 2012. However, at the present time only 5.5% of its present mortgages are funded by the Spanish based bank.
“Those who want a good mortgage deal should act sooner rather than later, in case the market seizes up altogether,” Mr Boulger said.
In the meantime, Ben Thompson of the Legal and General Mortgage club said that alternative lenders were hoping to fill the gap in the market left by Santander but funding conditions were making it extremely difficult.
In addition, there is a range of potential new lenders looking to enter the mortgage market but have yet to be regulated by the FSA. Those names include Tesco Bank and Castle Trust and as they wait for clearance, the blame for the delay has been levelled firmly at the FSA.
You could certainly name the FSA as a culprit in the lack of capacity,” Ray Boulger added. “It would be helpful if it stood by its own deadlines.”
With Santander pulling back, there is a clear need for someone to fill that gap but is anyone going to be in a position to step in during 2012?
The theme for much of the latter half of April and the beginning of May was one of continued mortgage rate rises and the threat of an increased number of households faced with a significant increase in monthly payments. The knock on effect that this had would conceivably leave more households in the so called ‘mortgage trap’; unable to afford higher payments but not in a position to switch lenders as they were unable to meet stricter criteria.
However, there are suggestions within the industry today that the mortgage hikes may soon be coming to an end and Ray Boulger, senior technical manager at mortgage lender John Charcol leads the voices making this suggestion.
“I think that this upward rate movement that we have seen, we are probably fairly close to the end of that,” Mr Boulger said.
“We have seen over the last two months or so, a series of lenders continuing to push rates up – typically only by ten or 20 basis points at a time, but it is a steady increase – and most lenders have increased their rates several times over the last few months simply to try to stem the flow of business,” he added.
The reaction came after several weeks of mortgage rate hikes which have been tempered to some extent by cuts from some lenders. The overall picture tends to balance itself out, although that may not be welcome news for those in the ‘mortgage trap’ who have suffered at the hands of a recent increase.
“We are now coming to the stage where we are seeing some lenders put rates up but some lenders cut them, whereas a few weeks ago nearly all the rate changes were upwards,” Mr Boulger added.
“So there are signs that this upward movement in fixed-rates is coming to an end.”
The reaction comes in reply to a survey from Which? that pointed to worrying signs in the housing market with significant percentages of property owners facing difficult periods if their lenders were to increase their monthly payments. That survey showed that 70% of people interviewed held fears of prospective interest hikes while 14% were already having difficulty in paying their mortgage.
Elsewhere, monthly figures released by Nationwide claim that property prices fell by 0.2% in April and are now 0.9% down from the same period last year.
Overall, this may point to mixed news depending on where you are in the property chain. For first time buyers it suggests that this is a good time to get onto the ladder but if your variable rate is increasing and you can’t switch lender, news of impending cuts will come as little consolation.
In recent weeks there have been many reports of lenders increasing their mortgage rates and there has been plenty of additional discussion about the impact that this may have. Results of a survey from Which? have just been released that highlight consumers concerns over the hike in their monthly charges.
Amidst reports that over a million customers would be facing a collective rise of £300m in mortgage payments, the organisation found that of those surveyed, 70% of mortgage holders are concerned about monthly increases while 14% declared that they were already struggling to meet higher payments.
Which? claim that those worst affected can be put into the bracket known as ‘mortgage prisoners’ – those who are not able to move to another lender for whatever reason.
Of those people surveyed, 41% said that if their mortgage were increased by £50 a month then they would have to cut back on regular household essentials such as food with 11% stating that they simply wouldn’t have enough for the vital areas of the family budget.
The percentages continue to increase in line with potential higher payments and for anyone facing a £100 a month rise, 11% said that they would simply be unable to pay their mortgage.
Which? went on to find some worrying statistics with regards to those already facing up to mortgage debt. The organisation found that an encouraging amount of people in this situation had already contacted their lender but very few were being met with any real help.
“Our advice to anyone struggling with their mortgage repayments is speak to your lender straight away. It is encouraging that a third of people we spoke to had approached their lender, but, worryingly, in one in five cases, they said their lenders offered no help at all,” said Peter Vicary-Smith, Chief Executive of Which?
“This is just not good enough and we want to see banks do more to help their customers who are struggling. These SVR rises are the consequence of the lack of competition in the market and the failure of the Government to take action to promote competition.
“This is why the new financial regulator, the FCA, needs to be a watchdog not a lapdog. It must stand up for consumers and stand up to the banks.”
This ‘Watchdog not Lapdog’ campaign that Mr Vicary-Smith referred to wants lenders and the FCA to protect their customers against unjustified rate rises and ensure that they are offered options of fixing payments at a reasonable level. Which? also wants lenders not to take advantage of those who are unable to switch mortgages.