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.
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.
UK financial analysts are warning that the crisis hitting many parts of Europe at present may filter through to Britain to the extent that mortgages may become even scarcer to track down than they are at the moment.
Financial trading continues to operate with fewer borders and as such, UK banks with a Europe-wide presence are going to feel the effects of the current problems and their mortgage arms may be set to tighten their criteria and maybe even remove some products altogether.
According to the Council of Mortgage Lenders, short term prospects for the UK mortgage market were going to be directly affected as a result of the on-going problems in Greece and elsewhere. Recent figures released by the CML have shown an easing of mortgage lending following a spike at the start of 2012 as many borrowers sought to take advantage of the stamp duty holiday.
Gross mortgage lending for April stood at £10.2 billion and while that represented a fall of 19% from March, it was still 2% higher than for the same period in 2011. The stamp duty window was always going to give a false picture and the fact that lending is higher than a year ago might give cause for optimism but the CML have warned against complacency.
“The underlying picture appears to be one of easing momentum in the housing market, but with potential for a sharper downwards correction on bad eurozone news,” said Bob Pannell, chief economist at the CML.
Meanwhile, mortgage brokers are urging borrowers to be alert to the danger that the crisis may bring as lenders consider their options.
“The cross-border nature of banking means that UK banks cannot remain immune to what happens in the eurozone,” said Mark Harris of SPF private clients.
“While interest rates are unlikely to rise for three to five years, supporting the market to an extent, borrowers must keep an eye on lenders raising mortgage rates regardless and take action if required and if they are able to.”
On many occasions in the past, prospective buyers may have been put off by dramatic headlines in the media and it is also felt that this factor may apply in the current climate.
“Few could argue that the demand for property, already weak, has been dealt a further blow by the deterioration of the Eurozone,” said Martin Stewart of London Money.
“With apocalyptic headlines every day, who wants to commit to a transaction as big as moving house?”
The volatile situation looks set to continue for the coming months but how much effect will the news from Greece and elsewhere start to have on the UK mortgage market?
A significant rise in the number of homes sold in the UK was recorded by HM Revenue and Customs (HMRC) in March and they claim that this is largely down to a seasonal ‘spring bounce’ that is evident in the housing market on an annual basis. HMRC also suggest that the Stamp Duty holiday has had an effect on property figures for the earlier part of the month.
HMRC recorded 74,000 sales during March as opposed to 63,000 for the previous month with Gross Mortgage Lending up by 30% over the same period according to the Council of Mortgage Lenders (CML).
This is the third year in a row that housing market activity has increased sharply from February to March but the figures are still some way short of those declared during the most recent housing boom. Sales activity for March 2012 stands at around 50% of the number of transactions recorded in March 2007.
In the meantime, the British Bankers Association (BBA) have produced a set of figures which at first glance seem slightly at odds with the claim that gross lending had risen sharply. The organisation indicated that mortgage approvals slumped alarmingly in March and they now stand at a ten month low.
Approvals had hit a two year high of 37,977 in January but after falling back to 32,840 in February they have dropped further to 31,888 in March. The BBA also point to the Stamp Duty Holiday as a reason for masking some of the figures but Howard Archer of IHS Global Insight fears that these figures indicate a worrisome trend that could lead to a depressed period for the UK housing market.
Moreover, Mr Archer is concerned that news confirming Britain’s return into recession will have severe implications for the property market as a whole.
“The housing market may well be hit by heightened consumer concern over the economic outlook following the news that the UK is officially back in recession with gross domestic product contracting 0.2pc quarter-on-quarter in the first quarter,” Mr Archer said.
“It is also possible that housing market activity and prices will be softer in the near term as a result of the stamp duty concession having brought forward a significant amount of fist-time buyer activity,” he added.
As we’ve seen in recent weeks, the recent Stamp Duty Holiday has been given credit for inflating many of the statistics within the property market within the first three months of this year. It had been widely expected that those statistics would be lower for the rest of 2012 but with consumer uncertainty over the recession, there are clear fears of an alarming slump.
While the underlying trend for the housing market is one of uncertainty, the Council of Mortgage Lenders (CML) have suggested this week that there are some positive signs as property experts search for the merest hint of a potential recovery.
The claims come as the CML confirm that gross mortgage lending for February stood at £10.7bn and while this was virtually unchanged from the previous month’s figures, it still represented an increase of some 14% from this time last year.
This was the seventh time in a row that month on month lending had increased compared to 2011 and CML’s chief economist Bob Pannell was positive about the findings.
“Property sales remain fundamentally weak, but have shown strong year-on-year increases since the closing months of 2011,” said Mr Pannell.
“Allowing for the seasonal factors that depress activity over the winter months, the underlying picture for house purchase activity continues to show some buoyancy.”
Economists have been quick to point out that the February figures are still some way below those of last summer but this is a view that underestimates the power of the weather as a factor in buying activity. Seasonal increases have been shown year after year as buyers begin to stir as soon as summer starts to roll in.
A further reason for the fact that lending is increasing in 2012 seems to be the Stamp Duty holiday which is getting the credit for much of the figures currently released in the property market. At present, the charge of 1% is waived for property purchases up to £250,000 but that window is due to close in the next few days.
“We expect the number of first-time buyers to drop back after March as would-be buyers adopt a wait and see attitude,” said Mark Harris, of mortgage broker SPF Private Clients.
Mr Harris went on to suggest that despite the CML’s claims of ‘buoyancy’, the overall picture was essentially one of a depressed market that was firmly anchored in a period of uncertainty.
“Weak consumer confidence and a shortage of homes coming to market are set to continue, although we do not expect interest rates to rise for three to five years, which will support the market to an extent. Mortgage rates, however, will continue to rise on the back of higher funding costs,” he added.
Looking at the two sets of quotes it almost seems if the CML are desperately willing them to spark a feeling of positivity with economists. However, Mark Harris’ view is a commonly held one and a further gloomy outlook could be triggered by the imminent closing of the Stamp Duty Holiday.
Figures released this week by the Council of Mortgage Lenders (CML) show an increase in mortgage lending for January compared with the same month in 2011. However, the expected seasonal fall led to a dip in lending compared with the previous month of December and the findings come amidst headlines cliaming that property sales have fallen.
The CML’s statistics show that gross mortgage lending for January finished at a figure of £10.5bn which represented a 12% fall from December and a 10% increase from January 2011. In addition, this was the sixth month in a row that year by year comparisons had shown an increase, but the CML qualified that fact by stating that very low levels were involved.
“The recent improvement in housing and mortgage market sentiment is welcome,” said Bob Pannell, CML’s chief economist.
“But we should be careful not to overstate its significance, given the very low levels of activity we are starting from and the protracted and difficult economic rebalancing that the UK and other countries have embarked upon.”
Any thoughts of positivity from these findings were quickly tempered, not only by Mr Pannell’s comments but by figures released by Her Majesty’s Revenue and Customs which show a fall in property for January. However, behind the headlines, there is the usual and completely anticipated New Year slump. Furthermore, sales for last month revealed the highest January figures since 2008.
Throughout the UK there were 64,000 property transactions in January 2012 in contrast to 86,000 sales in December 2011. However, compared with the January figures from a year ago, there is an increase involved of over 12,000.
This could be seen in some quarters as a significant rise but as we’ve already seen, some experts are telling us to expect misleading figures as the window for the entry level stamp duty waiver prepares to close.
The 1% level for properties between £125,000 and £250,000 will be reintroduced in March and it’s believed that the current rise in property sales as a year on year comparison could be sparked by a clamour to buy before the window closes.
“The increase in lending compared to January last year helps support our view that housing and mortgage market activity may be boosted by first-time buyers seeking to complete deals before the stamp duty concession ends in March,” Bob Pannell added.
It’s so tempting to look at these figures and search for long term positive signs but it seems that the real story for 2012 won’t even start to be told until the stamp duty waiver comes to an end.
So far, the first month of the New Year has seen many property experts predicting a sustained and consistent rise in mortgage rates with the general feeling being that they had reached the lowest point that they could possibly attain. Those reports have been tempered today by suggestions that rates will increase shortly but this will precede a period of rise and fall as the year progresses.
Once again, uncertainty over the economy has been blamed by those who have hinted at the forthcoming rate changes while concerns over the Eurozone crisis are believed to have led to a recent spate of increases from various lenders.
Over the course of the last few days, several major lenders have increased their rates in line with expectations and they are expected to be followed by many more home loan providers in the coming days. This news is very much in line with predictions at the start of 2012 but until now, there hadn’t been suggestions of a period of ‘ebb and flow’.
Andrew Montlake of mortgage brokers Coreco suggests that with the bank rate holding firm, lenders are set to adjust their rates upwards and downwards until they get the level of business that they are looking for,
“We are going to see a period in which the Bank rate remains stable, so lenders will manage the business they want by increasing or decreasing their rates,” Mr Montlake confirmed.
In fact, there have even been some rate reductions by some lenders for first time buyers and these go some way to confirming the likelihood of these new predictions. Mr Mortlake went on to claim that this volatility in the market will continue for the first half of the year at least and is set to continue until more is known with regards to the Eurozone crisis.
A likely outcome in the short term is a huge disparity in available mortgages as some lenders increase their rates while others start to apply reductions. The advice in this instance is quite simply to shop around.
“It really does pay to shop around at the moment if you are looking for a mortgage as some lenders are much more expensive than others,” confirmed Aaron Strutt, of Trinity Financial.
As predictions turn into confirmed rate changes, the mortgage picture may look confusing to some but if you are prepared to look hard enough for reductions, these developments could be good news for many.
Now that the wave of predictions for the 2012 property market has died down, the first batch of actual figures are being released with some positive signs for the year ahead. Reports released this week indicate that the asking price for new properties released on to the market actually grew by 1.4%
Perhaps more significantly, there was an increase in potential buyer activity too with 27 per cent more internet searches performed than at the same time in 2011. While a figure of 1.4% in prices may not be enough to get too many experts excited, the 27% search increase is an impressive rise and may just lead to a more positive start to the year than many have predicted.
Property expert Selwyn Lim is certain that these figures are a positive indicator for the months ahead,
“Since the internet began, more people have been searching online and that trend is continuing,” Lim said. Nevertheless, I am sure some of it is a growth in people searching for property in general.”
Mr Lim did however warn that while these figures were welcome in a period where the forecast is generally a gloomy one, the market should guard against what he referred to as ‘excessive optimism’.
One of the problems with regards to moving the market forward is the continuing issues that new buyers have in obtaining a mortgage. The predictions that were produced at the end of 2011 hinted that this situation could be set to get worse as criteria tightens and the ever decreasing window for sub-prime lending continues to close.
Meanwhile, some property experts have been highlighting the value of hybrid mortgages this week while suggesting that they could increase in popularity during 2012. A hybrid mortgage starts its life as a tracker before ending as a fixed rate, thereby giving the borrower the ‘best of both worlds’ according to its supporters.
Catherine Hearnden, director at MyMortgageDirect said that a mortgage of this kind could be a perfect solution for any borrower who is undecided over which path to take.
“People are not keen on fixing now because rates are low and everyone has got it in their head that rates will increase. You have got the benefit now of a tracker, but you know that your rate will not increase between years three to five,” she said.
Hearnden also went on to say that many are unaware of the hybrid’s existence.
“It is quite a new thing, so I shouldn’t imagine that people do know they are out there. Certainly when we ever talk to anyone about them, it is not something that they were expecting,” she added.
A hybrid mortgage may not help those that are struggling to get funds in the first place but they could be a solution to help convert the increase in property searches into confirmed sales.
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Is Remortgaging for You?
It’s true that interest rates are at their lowest levels in years and this has led to many homeowners remortgaging in a bid to save on their monthly mortgage payments. The good news is that many lenders are offering low interest products and products especially designed for those looking to remortgage. Whilst many homes have dropped in value, you may still have enough equity in your home to consider a remortgage. You may also want to take advantage of the low interest right now – this rate is not expected to rise until at least the end of 2012.
What Is A Remortgage?
A remortgage is simply a new loan which in effect replaces your existing mortgage. You can obtain your new loan through your existing lender or you can choose to use a different lender. There are many great deals around right now so it’s definitely worth shopping around for the best deal. The remortgage process involves your old mortgage loan being paid off and any remaining monies made available to you to do with as you wish. Before you rush off to remortgage, read about the penalties for early repayment of your loan below.
Why Would I Want A Remortgage?
There are many reasons why homeowners may wish to remortgage:
To make the most of lower interest rates
To pay for expensive items such as home improvements or a wedding
To consolidate debts such as car loans and credit cards
It’s important to remember that your mortgage loan is secured on your home so it’s essential that you are able to meet payments on time.
When is it Not a Good Idea to Remortgage?
Whilst many can benefit from remortgaging there are some circumstances where this won’t be a good idea. For example, you may still be tied in to a fixed term deal and that means you will probably be liable for a penalty payment for paying off your mortgage early. This can often amount to thousands of pounds in early repayment charges. Also, if the balance of your existing mortgage is low you may find that many lenders are not willing to underwrite a remortgage or that the fees involved will be more than the savings you make by remortgaging.
Another reason to avoid remortgaging is if your employment has recently altered and especially if you have recently become self-employed. Lenders need to know that you are able to repay your mortgage payments and they can often hold back when it comes to more uncertain incomes. The good news is that there are many lenders relaxing these rules and there are also lenders offering specialist mortgage products for the self-employed.
How to Remortgage?
It’s a good idea to stick with your existing lender in many cases. They often have great offers for existing customers and you may find the application process a little easier too. Do check out the rest of the market though as more and more mortgage products are being released onto the market each week. It’s a good idea to speak to a mortgage broker for free mortgage advice on the latest deals and products.
Once you have found the lender you want to use, the process is as follows:
The lender will need to know the value of your home
You will need to complete a new loan application
The lender will need some conveyancy work to be carried out to secure a title report
You will also need to engage the services of a solicitor to arrange repayment of the loan to your existing lender
The Cost To Remortgage
It costs varying amounts to remortgage depending on the lender, but it should usually cost you less than when you first took out a mortgage. It’s essential to find out what other costs are involved in remortgaging. Some lenders may waive fees and charges or at the very least reduce them if you are taking out another product with them.
Many homeowers reap the benefits of remortgaging by enjoying lower payments and if they have equity available in their homes, a little extra on the side.
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Precise Mortgages released a report this month that revealed the number of mortgages available to domestic customers rose to 2,784 in October. That’s a 10% increase on August.
A close study of the current mortgage market suggests that a higher proportion, 25% in fact, of those products are available through mortgage advisors compared to those on offer direct from lenders.
Surprisingly, only 44% of UK borrowers said they would use the services of a mortgage broker to secure their next mortgage deal although the majority of borrowers only want to make one mortgage attempt. We suspect that people are not going to mortgage brokers because they believe they will have to pay commission or that they won’t get access to the best deals.
It’s true that some mortgage brokers tied in with estate agents may have given the service a bad name. Some mortgage brokers have in the past received commission and incentives to recommend certain products over others. However if you choose an independent mortgage broker, they will give you a ‘whole of market’ analysis and recommend the very best mortgage product to suit your budget, your circumstances and the property you are buying. Many estate agents recommend working with their own in-house mortgage brokers and this service can prove invaluable.
Many people are also afraid to apply for a mortgage, believing that their credit score is too low to be accepted. If you are worried about your credit score the best thing you can do for your peace of mind and your buying power is to check it out. You can do this easily online by paying a small fee and doing so could give you peace of mind that your credit score is good or that you need to resolve discrepancies. Remember, if your credit score is bad and you keep making applications, you could be damaging it even further.
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