Posts tagged: lending
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.
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.
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?
Figures released by the Buildings Societies Association (BSA) show a rise in gross mortgage lending of 32% in January and the report goes on to call this rise ‘significant’. However, any optimism felt as a result of these findings may have been tempered by the announcement that both the Halifax and Royal Bank of Scotland were increasing their interest rates, blaming increased funding costs.
The BSA’s figures showed that the 32% rise resulted in an increase in lending from 1.4 billion to 1.9 billion from the previous month and this represented a rise of 54% on the findings declared for the same period in 2011. However, the stamp duty window, which is being cited as a reason for most positive signs in the property market is also being credited for much of this increase.
The window closes later this month and it’s widely accepted that any spike in lending and sales is down to a rush of homeowners looking to take advantage of the waiving of the 1% fee for properties between £125,000 and £250,000.
“Lending activity by mutuals was up significantly in January compared to the same month last year, continuing the trend of increased lending by the mutual sector seen throughout 2011,” said Adrian Coles of the BSA.
The news comes shortly after the association reported a two year high in mortgage approvals which had risen in January by 7% to 58,728. However, the Council of Mortgage Lenders rather summed up the current position, claiming that the figures were slightly obscured by the Stamp Duty Holiday.
“We are now likely to see an unhelpful bunching of activity prior to the concession’s expiry, followed by a dip,” the Council said.
That dip could also be affected by a rise in mortgage rates which has been led by Halifax and the RBS, both of whom announced their increases last week.
Halifax announced that it would be raising its variable rate from 3.5% to 3.99%, adding that the process of raising money through retail savings and wholesale markets was proving to be very expensive. Meanwhile, the RBS confirmed that it was raising the rate on two of its products by 25 basis points.
The two lenders have already been joined by Santander in increasing its own rates and more are expected to follow.
“If lenders continue to raise their rates those with the smallest deposits – the first-time buyers – will get hit hardest, because the risk they pose means they cost more to lend to,” said Mark Harris at broker SPF Private Clients.
As with much of the current announcements within the property market, it appears that the true picture won’t be known until the stamp duty holiday ends and any increase in rates takes hold.
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.
Figures released this week show that mortgage lending grew in November 2011 and while the news tends to contradict some of the gloomy forecasts for the 2012 property market, it is being met with considerable and predictable caution.
The figures from the Council of Mortgage Lenders show that lending rose by 4% from the previous month with the number of loans made increasing to 47,000. This also represented a rise of 3% on the figures from November 2010.
The CML welcomed the news amidst claims that mortgage lending restrictions were going to increase but figures are still running at around half of the levels experienced prior to the banking crisis of 2007.
“A rise in mortgage lending towards the end of 2011 is a welcome indicator for the industry considering confidence has been weak due to fragile economies both at home and in the Eurozone,” said the CML’s director general Paul Smee.
Smee goes on to say that he expects further rises from now until March when the government’s stamp duty exemption ends. Up until then, buyers will not have to pay the 1% charge on properties costing less than £250,000.
“We should expect a further increase in first-time buyer activity over the next few months as they push through their purchases to take advantage of the stamp duty concession before it ends in March,” Smee added.
Does that mean however that the mortgage lending figures are in any way artificial? The CML went on to add that of the 47,000 home loans for that month, 17,300 were taken out by first time buyers which represented an increase of around 4% from the previous month. Of that figure, it’s not been confirmed how many would have been for house purchases under £250,000 but it’s likely to have been a significant proportion.
The Council did confirm that lending to first time buyers had been steady since 2007 with them contributing to between 34% and 40% of overall purchases. That would suggest that with a constant level of first time buyers, mortgage lending figures aren’t necessarily over-inflated but a further spokesman for the CML warned of a slump once the stamp duty concession ends.
“If we look back at the figures from last year, first-time buyer activity tumbled in the first couple of months of the year. That is likely to happen after the Stamp Duty relief ends in March,” the spokesman concluded.
The Council of Mortgage Lenders has today announced that Gross mortgage lending in the UK rose by 5% in July 2010 compared with June. This is still down 3% year on year but is on par with the CML’s revised forecast for the year.
In today’s market commentary, CML economist Paul Samter commented:
“It is difficult to see anything other than a slow market for the rest of this year as underlying activity remains subdued. The rest of 2010 is likely to see rather lower lending and transaction numbers compared to the same period last year.
“But for most home owners, the situation is not that bleak. The vast majority of households continue to pay their mortgages in full every month, and many have benefited from the record low interest rates. This looks set to continue for some time yet. While there are a range of risks to the outlook, low rates will further help most stay on top of their finances.”