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Fixed rate mortgage costs at historic low

Two, three and five-year fixed rate mortgages have all come down in cost over the past 12 months and witnessed some big reductions compared to five years ago, according to Mortgage Brain’s latest product data analysis.

The cost of a 60% LTV, five-year fixed rate, for example, is now 5.7% lower than it was this time last year, while a 60% LTV two-year fix is now 4.1% lower.

In the 80% LTV space, five and two-year fixed rate products now cost 3.2% less than they did at the beginning of January 2019.

Five years ago

The fixed rate market also shows a big improvement in terms of cost compared to five years ago.

Mortgage Brain’s latest data shows reduction in cost for the two-year fixes at 60, 70, 80 and 90% LTV of between 9.8 and 17.8% and the equivalent five-year fixed products have fallen between 12.1% to 14.4%.

Monetary savings

In monetary terms the 5.7% reduction in cost over the past 12 months equates to an annual saving of £432 on a £150k mortgage.

Compared to five years ago, however, borrowers can secure a potential annual saving of £1,584 for the 90% two-year fix, and £1,206 and £882 for the five and two-year 60% LTV products respectively.

While favourable reductions in cost have been seen over the past 12 months and longer, Mortgage Brain’s short-term analysis shows little movement with mortgage costs for the majority of mainstream products remaining static with those offered at the beginning of October 2019.

Comment

Mark Lofthouse, CEO of Mortgage Brain, commented: “Our latest product data analysis shows that while there’s little to get excited about in terms of rate and cost movement over the past three months, the UK mortgage market has seen some big cost reductions over the year and particularly over the last five year

“With mortgage costs down by up to 17.8% compared to January 2015, there are savings across the board that advisers are able to offer their customers. Mortgage costs remain at historic lows and forecasters are predicting that this will continue in to 2020.”

By Joanne Atkin

Source: Mortgage Finance Gazette

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November year-on-year mortgage lending falls

The number of mortgages completed in November 2019 was down by around one tenth on the same time last year for both first-time buyers and home movers, figures from UK Finance show.

There were 30,620 new first-time buyer mortgages, down 10.5% from November 2018, and 30,750 home mover mortgages, a drop of 10.6%. This movement reflects particularly strong home-purchase activity in November 2018.

The value of first-time buyer mortgages was £5,271 million while home mover lending stood at £7,012 million.

Remortgaging

Remortgaging with additional borrowing in November 2019 rose by 5.7% year-on-year to 18,610 cases with the average additional amount borrowed being £51,470.

There were 18,470 new pound-for-pound remortgages (with no additional borrowing), which is down 12.4% from November 2018.

Buy-to-let

Buy-to-let home purchase loans fell in November 2019 to 6,300, which was 4.5% fewer than the same time last year. Remortgaging in the buy-to-let sector was also down, by 5.1% to 15,000 cases.

Comment

Rob Barnard, director of intermediaries at Masthaven, said: “These are mixed figures from UK Finance, however the mortgage market was resilient in 2019, particularly for first time buyers. This slight dip in completions could be a reflection of pre-election jitters. As certainty starts to build around the country, we should see a bounce bank in figures.

“However, the industry needs to ensure they are working to support the market. We need to capitalise on growing positive consumer sentiment and continue to offer products which suit modern lifestyles.

“As we move into 2020, we need to ensure later life and self-employed borrowers also benefit from increasingly flexible and innovative products and rates and we don’t leave any borrower groups locked out of the market”.

Nick Chadbourne, CEO of conveyancing solutions provider LMS, commented: “The continuation of low interest rates and competitive products from lenders ensured 2019 ended with a stable remortgage market.

“LMS data shows the gap between purchases of 5-year fixed rate products and 2-year fixed rate products has been closing steadily in recent months as borrowers take advantage of lower rates in place of longer-term certainty. It will be interesting to see if the balance will shifts one way or another moving into Q1 2020.

“All eyes are on the upcoming base rate decision. It will be interesting to see how lenders and borrowers react if there is a cut, as has been hinted at by prominent policy makers, given that it has been a while since rates last fell.”

By Joanne Atkin

Source: Mortgage Finance Gazette

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Mortgage approvals: what do the current rates tell us about home ownership in the UK?

The number of mortgage approvals fluctuated throughout 2019, plummeting as low as 62,000 but also going beyond forecast, reaching as many as 67,000. Towards the end of the year, the housing market saw a definite increase in mortgage approvals – reaching 64,994 between November and December – and although the December data* is yet to be confirmed, it’s likely to show a similar result.

So if you’re thinking of getting a new home in 2020 and need to find the best mortgage deal, what do these figures really say about your chances of getting on the property ladder this year?

The current figures show that getting a mortgage still isn’t plain sailing. The housing market has come a long way since the financial crash of 2008, which saw historically low mortgage approval rates of around 26,000 in the November of that year. And although there has been an improvement, it’s still clear that mortgage approval rates haven’t fully recovered to anywhere near pre-crash levels, and they certainly aren’t close to the mortgage boom years of the 1980s where May 1988 saw over 150,000 mortgages approvals (the largest number recorded for the UK).

If we look at home ownership rates, these numbers have not fully recovered from the financial crisis of 2008 either. In 2007, we saw an all-time increase in home ownership rates, sitting at 73.3 per cent, but that number was then at a historic low in 2016, at just 63.4 per cent.

So what is the current rate of home ownership?

Just over 65 per cent – only two per cent over the historic low.

So given the relatively auspicious economic climate, low unemployment, and low interest rates, what’s the underlying reason behind such low home ownership rates?

If we take a closer look at mortgage approvals, there is a downward tendency on remortgage approvals, while net mortgage lending keeps going up – by billions.

People are finding it more difficult to move up the property ladder – a well recorded problem since 2016 – and they are borrowing ever larger amounts to use on housing due to hefty deposits that are unaffordable for most. Mortgage approval rates would go up significantly, if first-time buyers had access to more low-deposit mortgage options that are not guarantor mortgages or Help to Buy.

Want to maximise your chances of getting approved for a mortgage in 2020? Read out guide to mortgages for first-time buyers, which covers deposits and much more.

*All data from Trading Economics

BY ANNA COTTRELL

Source: Real Homes

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Mortgage price war to continue throughout 2020

The so-called mortgage price war that saw lender profits tumble and some banks pull the plug on mortgage lending in the past year is set to continue throughout 2020, brokers have warned.

Luke Somerset, chief commercial officer at broker firm John Charcol, said the sustained pressure on mortgage pricing was “likely to continue into 2020 and beyond”.

Over the past few years a competitive mortgage space has seen lenders cut rates in a ‘race to the bottom’. The average mortgage rate for a 10-year fixed mortgage stood at a record low of 2.76 per cent as at the end of November.

The average two-year fixed has sat below 2 per cent for those with a 40 per cent deposit over the past year while the rates of five-year fixes have also been declining steadily throughout the year.

Mr Somerset said: “Most of the significant news in mortgages in 2019 has related not to economic or political uncertainty, but the ongoing pressure on margins for lenders.

“Some big names have been forced to throw in the towel in 2019 with the likes of Tesco Bank withdrawing their mortgage range. This pressure is likely to continue into 2020 and beyond.”

Tesco pulled the plug on its mortgage lending arm in May, citing challenging market conditions and “limited profitable growth opportunities” as the key reasons.

Looking forward, Mr Somerset said it was “widely assumed” that the money markets had already priced in the impact of Brexit so it was unlikely anything “overly exciting” would happen to swap rates — the rates at which the money markets lend among themselves and to lenders which partly underpin the rates at which consumers can borrow.

He also noted the Bank of England had headroom in terms of the base rate, should the economy need a boost.

Mr Somerset said this interest rate scenario, combined with the fact lenders were sitting on “plenty of capital”, meant lending rates were unlikely to increase beyond a few basis points. He added: “If anything, we may see a few reductions in rates.”

Retail banks are flush with cash due to a shake up of regulation which came into effect on January 1, 2019. The new Bank of England rules created a firewall between the banks’ investment banking operations and their lending arms to ensure they were still able to lend and consumer money was safe even if a shock hit the banking sector.

With the ring-fence in place, funds which formerly could have been used to back riskier investments are now trapped in the retail environment and being diverted to the mortgage market, which has amplified the price war.

This scenario was not likely to change in 2020, according to Mr Somerset.

By Imogen Tew

Source: FT Adviser

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What to expect from the 2020 mortgage and property market

As the new year and new decade roll in to play, we ask three mortgage and property experts about what homebuyers can expect to see in 2020.

Looking ahead to 2020 in the mortgage market, we’ve got to consider how Brexit will continue to impact interest rates and buyer‘s confidence. The UK is due to leave the European Union on 31 January 2020, after Boris Johnson’s Brexit deal was passed by MPs.

Following this, we may see some recovery in the economy and rates might start to rise steadily to maintain inflation. Political uncertainty has gripped the housing market for the past three years with many holding off buying and selling. As a result, there’s been a recent fall in mortgage lending.

However, the reassurance that comes with a five-year administration following the latest general election may encourage those prospective and current homeowners who had previously adopted a ‘wait and see’ approach to commence buying and selling. We’re hopeful we’ll see activity in the housing market increase.

With 35,010 new first-time buyer mortgages completed in the summer of 2019 we’re also hoping that the level of first-time buyers entering the market will continue to grow. It’s clear that despite Brexit, first-time buyers still aspire to get on the property ladder.

However, while the Help to Buy ISA has assisted more than 225,000 home buyers since 2013, this was withdrawn by the government in November. The government also plans to end the Help to Buy equity scheme by 2023.

For those who do want to protect themselves against Brexit-linked uncertainty, it’s worth considering a fixed-rate deal. Knowing how much repayments will cost each month will give some peace of mind. However, it’s always important to take any personal and future circumstances into account when securing a mortgage and seek advice from a broker to ensure you’re aware of the options.

‘Growing feeling that the London market has now bottomed out’

Andrew Montlake, managing director of UK mortgage broker Coreco:

With the General Election result finally delivering political clarity in relation to our exit from the EU, transaction levels look set to pick up in 2020.

Clearly a lot of the hard work around Brexit has yet to be done, but the political stability provided by a strong Conservative majority will give a lot of people the confidence to finally move home.

There’s a huge amount of pent-up demand for property and that will start to show through quite early in the New Year. In 2020, Spring for the property market is likely to start in mid-January.

With competition among lenders reaching feverish new heights, mortgage rates will remain highly attractive during 2020, giving people even more reason to buy and sell.

In recent years, the regions have outperformed the capital and while this trend may continue in 2020, there is a growing feeling that the London market has now bottomed out.

Affordability will remain a key issue for many borrowers, especially in London and the South East, and so the Bank of Mum and Dad, or Gran and Grandad, will play as critical a role as ever.

The first half of the year may see more activity than the second, as the feel-good factor caused by the General Election result slowly fades and the complexity of the trade negotiations ahead becomes clearer.

Overall, we expect average prices to rise by 2–3% during 2020, conservative growth in historical terms but significantly up on the sub-1% growth of recent years.

‘Degree of certainty may trigger flurry of activity’

More than a quarter (28%) of estate agents expect house prices to fall next year, down from 43% last year when agents were asked the same question. Over half (56%) of agents expect house prices to stay the same, according to NAEA Propertymark (National Association of Estate Agents).

A quarter think the number of sales made to first-time buyers will increase and over half (58%) expect it to stay the same. A third expect demand to decrease and a further quarter (28%) think supply will increase.

Mark Hayward, chief executive, NAEA Propertymark:

The changing political landscape throughout 2019 has undoubtedly caused uncertainty in the housing market, which in turn has affected sentiment and decision-making. Once the current political impasse is resolved and it’s clear how and when we’ll be leaving the EU, we hope there will be a degree of certainty which may trigger a flurry of activity.

Regardless of the colour of the new government, housing must be a priority. A clear strategy is needed to tackle key issues such as stamp duty costs.

Additionally, we’d like to see the government commit to bringing regulation into the sector as soon as they can in the New Year and to consider the introduction of digital logbooks to allow for a more interactive, streamlined and transparent process for home buyers and sellers.

The housing market needs reassurance from the government, which will in turn inject some confidence in the market for both buyers and sellers.

Despite the difficult year, the UK property market remains a strong sector overall, and has demonstrated a huge amount of resilience in the face of political turmoil. We hope for a more certain outlook and some stability in 2020, which is hopefully provided sooner rather than later.

Source: Your Money

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UK Finance: Mortgage approvals on the rise

Mortgage approvals rose while gross mortgage lending dropped in November, the UK Finance Household Finance Update has revealed.

Mortgage approvals for home purchases by the main high street banks in November were 6.8% higher whilst remortgage approvals were 12.7% higher.

Gross mortgage lending across the residential market in November was £23.1bn, 3.3% lower than in the same month in 2018.

David Hollingworth, associate director of communications at L&C Mortgages, said: “I suppose it’s positive the approvals were quite a bit higher.

“I just think we had some volatility last year and it’s encouraging to see approvals by the banks up quite a bit, with remortgaging even more so which is what you’d expect with the focus on remortgages with political uncertainty.

“This is a more positive story coming into the New Year.”

By Michael Lloyd

Source: Mortgage Introducer

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Remortgaging levels dip after strong period of growth

Remortgaging levels plummeted by 20% in October following a year of strong growth, the latest figures from UK Finance have revealed.

According to the Mortgage Trends Update for October, new remortgages with additional borrowing dropped off by 20.8% compared to the same month in 2018, with 18,910 being completed.

Meanwhile pound-for-pound remortgages, without additional borrowing, also plunged by 20% in October when 20,660 of these completions were recorded.

First-time buyer mortgages were more buoyant, with numbers up by 2.8% to 32,260 and there were also 33,370 home mover mortgages, which was up 4.2% when compared to the same month a year earlier.

In the buy-to-let market, figures were down slightly in October compared to the same month in the previous year. UK Finance reported there were 6,600 new buy-to-let home purchase mortgages, a dip of 1.5%.

Meanwhile, 16,200 buy-to-let remortgages were completed, down by 2.4% compared to October 2018.

Resilient market

Kevin Roberts, director of Legal & General Mortgage Club, described today’s figures as ‘mixed’ but pointed out they came at the end of a resilient year for the mortgage market.

He revealed the mortgage club had seen completion levels reach an all-time high in October. And he added: “Thousands of first-time buyers are continuing to take advantage of competitive rates to make the move into homeownership.”

Meanwhile, Mark Harris, chief executive of mortgage broker SPF Private Clients, said the fall in remortgaging numbers suggested many of those borrowers who needed to refinance had already done so and taken advantage of the cheap rates available.

He added: “First-time buyers continue to prop up the housing market with their numbers continuing to grow.

“Home mover numbers also edged up as those buyers brave enough to ignore political and economic headwinds got on with the business of moving.”

Many in the industry agreed the mortgage sector had clearly braved the Brexit uncertainty in October. They were keen to offer their views on how things would progress now there was more clarity following the Tory win in the general election.

Daniel Hegarty, founder and CEO of Habito, said its own analysis revealed online searches for getting a mortgage in the UK were up 113% over last Saturday and Sunday combined, compared to the same period in the previous week.

He added: “We’ll wait to see if this initial surge of online interest is backed up with more mortgage submissions and an increase in home-buying activity in early 2020. But, the very early signs look positive.”

By Kate Saines

Source: Mortgage Finance Gazette

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UK Finance: Mortgage market is still strong

Despite a backdrop of uncertainty, the mortgage market is still strong and competitive, UK finance chief executive Stephen Jones said at the regulator’s annual mortgage dinner.

He pointed to figures showing that gross mortgage lending will reach around £265bn in 2019, almost the same as in 2018.

Jones (pictured) said: “Our industry wants to focus on competitiveness, innovation, talent, tax, regulatory proportionality and coordination, and regulation fit for the future, all themes that underpin UK Finance’s work for our members.

“At UK Finance we seek to help our members, large and small, navigate change.

“A growing number of first-time buyers are entering the housing market, while existing homeowners are taking advantage of competitive products available in a low interest rate environment.

“The potential end of Help to Buy in 2023 presents a major challenge to growth in new housing delivery.

“We will continue to engage with governments across the UK on initiatives to support low cost home ownership and increase the new supply of affordable and social housing, and to ensure that housing association lending and investment continues to be attractive.”

He warned about the challenges that remain, for example 5-year fixed mortgages now account for nearly half of all fixed rate sales, a market where 2-year deals once dominated.

Jones added: “Longer terms will inevitably mean fewer remortgages in the coming years, which the industry must deal with.

“Our figures show that, despite challenging conditions in the buy-to-let market, lenders are continuing to support and work with landlords, to ensure sustainable and affordable finance is available for the private rented sector.”

By Michael Lloyd

Source: Mortgage Introducer

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UK Finance: Mortgage approvals rise

Both mortgage approvals for purchases and remortgage approvals rose in October, the UK Finance Household Finance Update has revealed.

Mortgage approvals for home purchases by the main high street banks in October were 3.0% higher while remortgage approvals were up 12.7%.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “As we head towards the end of the year, and lenders jostle for what business there is out there, there are some incredible deals on the market to attract borrowers.

“There was an uplift in people taking advantage of these, with mortgage approvals for home purchase some 3% higher than October last year, while remortgage approvals were 12.7% higher.

“Gross mortgage lending has fallen slightly compared with last October, reflecting perhaps the high level of uncertainty that continues to hamper the housing market as a whole.

“Until the General Election result and Brexit are settled, it looks unlikely that the lack of confidence this is instilling in the market will change.”

Andrew Montlake, managing director of Coreco, said the high street banks have got cash to burn at the moment, so it’s no surprise to see their share of mortgage lending increase.

He added: “The price war on the high street continues to rage and consumers are making the most of it.

“Buyers and homeowners alike are being driven on by the ridiculously low rates available, especially medium- to long-term fixed rates, which will help them ride out the uncertainty that the years ahead will bring.

​”Despite the manifesto rhetoric from both sides of the political spectrum, consumers don’t believe that anything will markedly improve in the housing market and question some of the promises made around house building and affordable homes.”

Gross mortgage lending across the residential market in October was £25.5bn, 0.9% lower than in the same month in 2018.

Sam Harhat, head of financial services at Andrews Property Group, said the Brexit tempo increased significantly in October and yet buyers and homeowners showed the same level-headedness they have throughout most of 2019.

He said: “Activity levels aren’t off the scale, but the property market is ticking over exceptionally well given the political environment we’re in.

“Remortgage activity remains particularly strong as people seek to lock into a lower rate before we leave the EU.

“5-year fixes are proving especially popular as they offer a robust hedge in the medium term.

“Mortgage approvals are also up slightly, as Brexit makes prices more affordable and people, especially first-time buyers, make the most of the competitive rates available.

“Aware that the current uncertainty is their window of opportunity, first-time buyers are particularly active at present.”

John Goodall, chief executive and co-founder of buy-to-let specialist Landbay, added: “While these figures are disappointing, they come as no surprise, considering the economic and political pressures the market has been facing.

“The reality is that lenders are (and have been) ready and willing to lend, instead it’s would-be buyers who need that final nudge to make their move.

“Looking forward, with the election looming, we may finally see the cloud of uncertainty begin to lift – assuming there is a clear parliamentary majority.

“If this does happen, we could see a spike in demand as those who were holding off in recent years consider making their move in 2020.

“With their genuine appetite to lend, lenders will be gearing up to facilitate any increase in demand.”

Jonathan Sealey, chief executive, Hope Capital, said that although the main banks continue to take the lion’s share of mortgage lending, it appears that borrowers are looking at alternatives to find the funds they need such as bridging finance.

He said: “Confidence is still being knocked by the uncertainty of what will happen as far as Brexit is concerned and the purchase market has stagnated.

“As a bridging lender we are seeing more borrowers and investors looking for finance to refurbish and improve property rather than moving or selling.

“It appears that until things are finally sorted out homeowners and property investors would rather sit tight, only moving or selling if they have to rather than because they want to.”

By Michael Lloyd

Source: Mortgage Introducer

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UK mortgage lending dips as buyers hesitate due to Brexit uncertainty

UK mortgage lending dipped in October as buyers hesitated due to economic and political uncertainty caused by Brexit and the upcoming General Election.

Gross mortgage lending across the residential market last month was £25.5bn, a dip of 0.9 per cent compared to October 2018.

Mortgage approvals for home purchases by the main high street banks increased three per cent and remortgage approvals soared 12.7 per cent, according to the latest data from UK Finance.

Credit card spending, which amounted to £11bn in October, was 2.3 per cent lower than last year, and repayments were in line with expenditure, demonstrating that consumers are managing their finances responsibly.

Personal borrowing through loans increased 7.4 per cent, and overdraft use was 1.2 per cent higher than the same time the previous year.

John Goodall, chief executive at buy-to-let specialist Landbay, said: “The reality is that lenders are (and have been) ready and willing to lend, instead it’s would-be buyers who need that final nudge to make their move.

“Looking forward, with the election looming, we may finally see the cloud of uncertainty begin to lift – assuming there is a clear parliamentary majority.

“If this does happen, we could see a spike in demand as those who were holding off in recent years consider making their move in 2020. With their genuine appetite to lend, lenders will be gearing up to facilitate any increase in demand.”

Mark Harris, chief executive at mortgage broker SPF Private Clients, added: ‘Gross mortgage lending has fallen slightly compared with last October, reflecting perhaps the high level of uncertainty that continues to hamper the housing market as a whole.

“Until the general election result and Brexit are settled, it looks unlikely that the lack of confidence this is instilling in the market will change.”

By Jessica Clark

Source: City AM