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.
In recent months there has been a drive by some property vendors to move away from the traditional estate agents and to look to sell their property by other means. Previously, many private websites had to be treated as Estate Agents by law but new government plans could be set to do away with that legislation and make the whole process much simpler.
The benefit of selling privately is obvious and anyone who is able to complete a sale in this way is able to dispense with estate agents’ fees. Private Websites offered a money saving alternative until they were brought under the estate agent classification but the government now plans to allow both types of business to operate under entirely separate rules.
This could lead to an even bigger move away from traditional forms of selling but there are those within the industry that are concerned over the proposals.
“These [planned changes] mean that prospective homebuyers and sellers will find it harder to distinguish between intermediaries and traditional estate agents,” said Peter Bolton King of the Royal Institution of Chartered Surveyors.
“Consumers could, perhaps unknowingly, be left responsible for undertaking their own detailed sale negotiations without the advice and guidance of a property professional.”
Mr Bolton King also felt that a greater move towards private sales could lead to more aborted transactions which could, in turn, impact on the property market as a whole.
“This could lead to delays, increased costs and even sales falling through, causing frustration and stress for all involved,” he added.
However, the government believes that the moves are necessary and that they will encourage and increase transactions in the months and years following their implementation. In short, there is a clear suggestion that lower fees might attract more vendors and lead to quicker completions.
One of the problems under previous legislation was highlighted in the case of Tesco. The supermarket giant had a website back in 2007 that charged a flat fee of just £199 for sellers to list their properties. However, once that site came under the estate agent umbrella, Tesco couldn’t justify the additional costs or time that was involved and the portal inevitably shut down.
“These intermediaries help buyers and sellers contact each other at a low cost, but do not engage in other estate agent activities, so it is unfair to expect them to go out and check all the property details of all the sellers on their websites,” said Jo Swinson, Consumer Affairs Minister.
“Reducing the regulations for these businesses will open up the market and increase choices for consumers looking to save costs when buying or selling a property.”
At first glance, it does seem that there are clear benefits for both buyer and seller but will the proposed changes really give a boost to the housing market once they are put into place?
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.
Last week, the Home Builders Federation (HBF) announced a welcome to new housing minister Mark Prisk while urging the MP for Hertford and Stortford to act quickly to protect the interests of domestic property building firms across the country.
Meanwhile, David Cameron and Nick Clegg have responded to calls within the industry to aid housing growth by announcing new proposals which will inject cash as well as addressing the question of restrictive planning laws.
“We hope he (Mark Prisk) will offer some radical ideas to transform the current housing and planning systems and tackle the housing crisis, providing economic growth and jobs, and strengthening communities across the country,” said Stewart Baseley of the HBF last week.
In the separate announcement, the UK’s coalition government claim that their brand new package of measures will create up to 70,000 new properties including a significant proportion of affordable new homes for first time buyers.
The proposals will also aim to create around 140,000 jobs in the sector as the government aims to inject £40bn into infrastructure projects. It will also look to reduce the obstacles put in the way of new homes and will allow developers to sit down with local councils and re-negotiate agreements on affordable homes.
Speaking on daytime television Mr Cameron said,
“Frankly we had a situation where the lenders did not want to lend so the builders could not build and the buyers could not buy. We are talking today about 140,000 jobs provided by building an extra 70,000 houses.”
Nick Clegg added that the scheme would simply make it cheaper for developers to build.
“If you are finding it too expensive to raise money yourself to put shovels in the ground to employ on construction sites and build homes for private rent and to build affordable homes we are going to make it cheaper for you to do so,” he said.
Predictably however, Labour’s opposition has criticised the government’s actions on new homebuilding as a whole.
“We need to get Britain building again, but the government has slashed the housing budget and the number of affordable homes being built is down by 68%,” said Rachel Reeves, shadow chief secretary to the Treasury.
“The fundamental problem is not the planning system or Section 106 agreements for much-needed affordable housing, it is the lack of confidence and demand in the economy, slashed public investment and the government’s failing economic plan.”
However, the Prime Minister is adamant that this shows a clear commitment from the government to address any problems and to meet the demand for new housing.
“The measures announced today show this government is serious about rolling its sleeves up and doing all it can to kickstart the economy. Some of the proposals are controversial; others have been a long time in coming. But along with our housing strategy, they provide a comprehensive plan to unleash one of the biggest home building programmes this country has seen in a generation,” Mr Cameron concluded.
The big news for housing this week came with the cabinet reshuffle that saw Grant Shapps moved from housing minister with Mark Prisk taking his place. Mr Prisk, the Conservative MP for Hertford and Stortford has been told in some quarters that he has a daunting task and that he must address many industry issues without delay.
The Home Builders Federation (HBF) has been particularly vocal in the wake of Mr Prisk’s appointment as it raises concerns above the future for new builds in the UK. Earlier this week, Steve Turner who is Head of Communications at HBF urged the government to put pressure on the country’s banks to increase their overall lending.
“There are ways that the government can help but ultimately we need to see the banks lending more money – it is exactly the same as for mortgages,” Mr Turner said.
Those comments came after claims that development finance represented the biggest obstacle to sustained home building and not planning policy as many believe.
On the HBF website however, the federation goes even further in putting their point across as they urge the new housing minister to ‘hit the ground running’. The HBF claim that at present, we are building homes at the slowest rate since the 1920’s and that we are only providing half of the country’s overall requirements.
The HBF go on to state that they are looking for the coalition government to address what it calls a severe lack of mortgage credit and development finance. Amongst other issues, the federation has also asked that funding is maintained for the FirstBuy scheme which has been responsible for 10,000 new homes in the UK.
It all adds up to a daunting task for the new incumbent – a fact which the HBF acknowledge.
“We welcome Mark Prisk to the role. Whilst he has an unenviable intray, it is clear that he understands the scale of the job in front of him with his background in the sector,” said Stewart Baseley, executive chairman of the HBF.
“We hope he will offer some radical ideas to transform the current housing and planning systems and tackle the housing crisis, providing economic growth and jobs, and strengthening communities across the country. In his previous role he undertook some positive work to reduce regulation, a commitment his Government has also made with regards to housing and something we hope he will now deliver on.”
The federation go on to welcome Mr Prisk and while the size of the issues facing the housing market as whole are a significant task, the questions that relate to new home builds are obviously going to take up a major proportion of the new Housing Minister’s role.
Letting agent rip offs are under the spotlight once again after new findings from Shelter released this week. In a survey of 5,000 tenants, the organisation found that 23% claimed that they had been unfairly charged by an agent at some point for contract renewals, repeated credit checks and even for viewing a property.
The poll found that the most common complaint was in regard to ‘administration’ – a term which covers a wide range of charges and tends to average at around 14% of the tenant’s property charge. In some cases, this amounted to a non-refundable, one-off fee of up to £540.00.
Typically, a 10% charge would then be applied for an initial credit check and further 8% fees levied for contract renewals. Incredibly, charges for repeated credit checks of up to £150.00 were made while some tenants were even asked to pay £100.00 simply for viewing a property.
“It’s scandalous that some letting agents are creaming off huge profits from the boom in private renting by charging both tenants and landlords fees that are totally out of proportion to the service they provide,” said Kay Boycott, Director of Campaigns, Policy and Communications at Shelter.
Jane Ingram, who is president of the Association of Residential Lettings Agents (ARLA), acknowledged that standards needed to be raised and pointed to her organisation’s repeated requests to the coalition government.
“Standards in the lettings industry do need to be raised. That’s why we have long-called on the Government to act swiftly and introduce a robust licensing system designed to protect consumers,” she said.
The figures have led to an attack on the government by the Labour Party who accused the coalition of standing by and doing nothing while the crisis deepens.
“Unscrupulous lettings agents are ripping off tenants by charging them fees they didn’t know they would face, and exploiting landlords and tenants alike by failing to protect the money they hold for them,” said Jack Dromey MP, the Shadow Housing Minister.
Mr Dromey went on to underline the effect these charges in having at a time when many families are struggling to cope financially.
“As the growing housing crisis and double dip recession put the one million families in the private rented sector under pressure, this is the last thing they need,” he added.
Shelter also found that some agents were double charging their fees to both landlords and tenants while some renters asserted claims that they feel vulnerable in the current climate.
Calls for the government to act are increasing and the only certainty is that this situation will only be repeated until action is taken.
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.
Throughout 2012, we’ve seen property prices fluctuate but the overall trend seems to be one of minor falls, depending on which set of figures you read. One point that many industry experts keep raising is the reluctance by sellers to bring down their asking prices but statistics released this week suggest that this situation may have changed.
Property website Zoopla has found that the number of houses that have sold for less than their original asking price is now at its highest level for nine months. However, the figures in financial terms may be very significant.
Of those properties sold, Zoopla reveal that 37% have had their asking price cut at least once while the average reduction is 7.6%, which in turn equates to an average drop of £19,000.
Traditionally, the summer is a quiet period for the market as a whole but those one-off events have also had an effect. It’s therefore thought that sellers have accepted the need to drop their prices in order to combat the further slowdown caused by the Olympics and the Queen’s Diamond Jubilee.
“Activity levels tend to fall over the summer months as holidays delay the buying process,” said Zoopla’s Nigel Lewis.
“With the recent bad weather and the extended jubilee bank holiday, the rise in proportion of price reductions is a signal that sellers have been doing everything they can to try and tempt those buyers still in the market.
“Once the distractions of summer holidays and the Olympics are gone buyers will once again be able to focus attention on their property search, and this should bolster confidence among sellers.”
Meanwhile, regional variations differ greatly but in regards to the overall market, it’s being claimed that the summer’s events are having little effect in some parts of the country. London based Estate Agent Marsh and Parsons claim that their own sales for the period of the Olympics – 27th July to 12th of August were up by 23 per cent compared to the same period in 2011.
“While many potential buyers were glued to their TVs and seats at venues rather than out viewing homes, London’s housing market didn’t grind to a halt by any means,” said Marsh and Parsons’ Peter Rollings.
“The traffic chaos and logistical problems feared in the run up to the Games thankfully failed to materialise, and a corps of committed buyers moving with urgency actually took advantage of quieter streets to secure homes.”
These figures are among the most interesting to have been released so far this year but were the boost in sales at this particular Estate Agents really down to quieter streets or are reduced asking prices about to have a marked effect on the property market as a whole?
Figures relating to mortgage lending and the property market as a whole have been affected by a number of unusual factors this year. Firstly, there was a late rush to beat the stamp duty ‘holiday’ on properties priced up to £250,000 and the subsequent summer lull was exaggerated by major public events – namely the Queen’s Jubilee and the Olympics.
However, figures released today by the Council of Mortgage Lenders (CML) suggest that lending in June 2012 was boosted by the return of many first time buyers to the market but does this mean we can expect a settled period for the remainder of 2012?
The CML confirmed that lending to First Time Buyers (FTB’s) stood at its highest point since July 2010 – excluding the solitary month of March 2010 when the property market saw a late rush to beat the stamp duty reintroduction.
Paul Smee, Director General of the CML welcomed the news but said that he expected further fluctuations in the market. Concern over the Eurozone crisis continues and the statistics have yet to see any impact from this year’s Olympics.
“Lending figures have see-sawed in the first half of the year and we may see more fluctuations in the coming months,” Mr Smee said.
Many property professionals are pleased to see FTB’s return to the market in such numbers but insist that more has to be done to make first time property purchases more accessible.
“It’s good news that ending the stamp duty concession appears not to have held first-time buyers back permanently, but they still need as much support as possible,” said Charles Haresnape, managing director at Aldermore Residential Mortgages.
“It will be good to see more lenders participating in NewBuy and offering schemes to help borrowers who are struggling to find a deposit.”
The Mortgage Advice Bureau confirmed that their own figures were largely in line with those released by the CML but they also predicted an uncertain period ahead.
“MAB’s own figures for May reflect those released by the CML,” said Brian Murphy, head of lending at the Mortgage Advice Bureau.
“However, we expect external factors to play a major part in activity levels in the next few months, with activity levels to continue to fluctuate.”
Overall, it’s impossible to identify any pattern in the figures released by the CML but it has to be a positive aspect to see FTB’s returning to this level. The future may be uncertain in the short term but longer term benefits should be attained by making it easier to make that first step onto the property ladder.
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.