Posts tagged: mortgage
Could You Take Out a 30 Year Mortgage? Thousands Are!
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.
Attractive ‘Swap Rates’ Can Boost the Subdued Mortgage Market
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.
Are House Prices Finally Being Slashed?
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?
FTB Borrowing Recovering After ‘See-Saw’ Year
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.
Mortgage Price War takes an unexpected turn
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.
Concern Over Rise in Equity Release
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.
What Do You Need to Get on the Property Ladder?
A recent survey carried out by RightMove on behalf of the Guardian has underlined just what First Time Buyers (FTB’s) currently need in order to take that vital first step onto the property ladder. Essentially, it’s claimed that those requirements amount to three key ingredients – a degree, a partner to share the costs and benevolent relatives who are prepared to help.
Over 5,000 FTB’s took part in the survey which found that one in four would be seeking assistance from their parents in order to fund a deposit. However, 53% of those surveyed claimed that they would be funding their purchase alone.
Overall, 38% of those surveyed were educated up to degree level and 30% held some form of postgraduate qualification. While the survey took in respondents of all ages, it was found that, of those between the ages of 25 – 34, 41% held a degree.
The findings were intended to underline just how difficult it is to get on the property ladder as house prices have risen beyond income increases in recent years. In addition, the perception is that lending criteria has made it increasingly difficult to obtain a mortgage but do these results really back those claims up?
You could reverse the headline to suggest that three in four respondents weren’t seeking financial assistance from their parents and for some, the fact that over half of FTB’s surveyed are buying a property alone is a significantly high figure.
Earlier this month, RightMove produced another survey of FTB’s which they claimed had provided some positive results as those buyers came to terms with the economic downturn. The findings revealed that of those looking to purchase a property within twelve months, three in ten were FTB’s and this was the highest level for almost three years.
Reacting to the news, Rightmove’s Miles Shipside said,
“The results come as a welcome surprise, hopefully this three year high in intending first-time buyers will come to fruition.”
“The property market needs this upward trend in first-time buyer activity to continue as first-time buyers perform an essential role at the bottom of the property market food chain. “
Mr Shipside also added a warning that the future for FTB’s was far from certain but, on the face of things, there are two sets of conflicting reports from the same source in the same month. Alternatively, perhaps this just emphasises that there are times when statistics can be viewed in two separate ways.
Who Takes the Blame for the Slow Mortgage Market
The property market as a whole was expected to slow down considerably this summer as the UK headed into a season of celebrations. With the Queen’s Jubilee followed quickly by the Olympics, it was predicted that sales and mortgage enquiries would be subdued, in keeping with the typical reaction to these types of events.
However, as the Jubilee fades and London 2012 approaches, another factor is being blamed for the lack of mortgage enquiries in recent weeks. The wet weather that has blighted much of this summer so far has been cited as the main reason for a significant drop in approved mortgages for home purchases in June.
Figures released this week by the British Bankers’ Association (BBA), claim that those approved home loans fell by 11% in June to 26,269 from the previous month. Meanwhile, the met office indicate that this was the wettest June recorded since 1910 so are those two sets of statistics related?
The BBA’s report blames the wet weather along with a host of other factors besides,
“June’s approvals numbers were affected by the Diamond Jubilee celebrations, Euro 2012, and the wet weather,” the BBA said.
“Paying off loans or overdrafts and building up deposits is the current consumer ambition,” David Dooks of the BBA added.
Mortgage activity as a whole has been slow since March and gross lending of £7.2 billion in June was also comfortably below the six month average. While no single factor can be held wholly responsible, those major events combined with appalling weather have all been factors and the prognosis for the near future is by no means encouraging.
“The ongoing eurozone crisis, which has stepped up a level in the past week, will continue to undermine consumer confidence and encourage buyers and sellers to sit on their hands until there is significant improvement,” said Mark Harris of SPF Private Clients.
“Any recovery in the housing market remains a long way off.”
As far as the ‘holiday effect’ is concerned, with the Jubilee over and the Olympics about to get underway, could we see an upturn in mortgage lending in the coming months? The wet weather has also abated and although the long range forecast is mixed, it seems unlikely that we will be returning to the torrential downpours seen throughout May and June.
Those events may soon be behind us but as Mark Harris from SPF Private Clients pointed out, there are considerably more factors affecting the mortgage market besides the weather.
The Vital Role of Parents in Property Buying
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.
UK Mortgage Lenders Not Immune to Eurozone Crisis
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?
