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Brexit and mortgages: how to protect your mortgage against interest fluctuations

What is happening with Brexit and mortgages, and is there a way you can safeguard yourself against the unpredictable effects of Brexit on your repayments? Moreover, given the latest projections of further interest rates cuts by the Bank of England, should you be looking at remortgaging to find the best mortgage deal?

For first-time buyers and those who are coming to the end of their fixed-term period, the announcement that interest rates are likely to remain low will come as a relief – a sudden hike in interest rates resulting in more expensive mortgages is highly unlikely at least in the next year. People remortgaging now are still going to enjoy historically record low interest rates on their mortgage repayments. However, do bear in mind that the rules for remortgaging still mean that you would have to be able to make the repayments if the interest rates were to rise.

The longer term prognosis for what’s going to happen to interest rates remains far less certain. There are two main scenarios you need to bear in mind as a mortgage holder: one is an economic recession, while the other is a strong economic recovery (following, for example, a successful Brexit deal negotiation or the UK revoking Article 50).

If the former were to happen, say as a result of the UK crashing out of the EU without a coherent deal (still a possibility despite the current delay), the pound could take a hit. While this would again mean low interest rates to try and stimulate the economy, it could also mean a loss of jobs – which, of course, would render low interest rates meaningless to someone who is unemployed.

To safeguard your mortgage against this case scenario, it’s a good idea to: 1) reduce your debt; 2) increase your savings; 3) consider income protection insurance that would give you a safety net for your mortgage repayments in case you were to be out of work or have to take on lower paid work.

In the case of an orderly Brexit (or no Brexit – who knows?) and the UK economy regaining confidence, we can expect wage growth. When that happens, inflation rises, which leads interest rates to rise too. Hopefully, in this case scenario, your salary will increase in line with interest rate rises, making mortgage repayments manageable. However, having a decent savings pot for this case scenario is still a good idea – as is being prepared to downsize in case you live in a property with a large mortgage.

BY ANNA COTTRELL

Source: Real Homes

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Brexit and mortgages: what next for interest rates and repayments?

What’s next for Brexit and mortgages? Will mortgages become more expensive, and should you remortgage now?

What’s going to happen now with Brexit and mortgages, since the EU has agreed to grant Britain a three-month extension? How does this decision affect potential and current home owners, up to January and beyond? Will we see much of a fluctuation in the Bank of England’s base interest rate, and with it, cheaper or more expensive mortgages?

Martijn Van Der Heijden, Chief Strategy Officer at online mortgage brokerage Habito, comments on the implications of the Bank of England’s decision last month not to raise interest rates:

‘Interest rates remain relatively low which will be welcome news for those looking to get a good deal on their mortgage. This “wait and see” approach from the MPC (Monetary Policy Committee) is something we also see reflected in our own data with a surge in buyers choosing fixed deals for five years or more as they try to “Brexit-proof” their mortgage and lock in the same rate until 2024 and beyond.’

Basically, whether you are first-time buyer or remortgaging, now is the time to lock in a good fixed rate mortgage deal – if you don’t mind losing out somewhat in case the interest rates fall even lower than the current level. Why might that happen? It all depends on how the final Brexit deal is negotiated, and how smoothly it is executed. In the still possible event of Britain not securing a deal, the pound is likely to fall, and inflation will rise, which could lead the Bank to slash the interest rates even further. If this happens, and you are on a variable rate mortgage, you could see your repayments fall.

On the other hand, in the event of an orderly Brexit and a strengthening economy, interest rates could rise, which would be good news for your savings and wages, but not so good news for your variable rate mortgage repayments. A fixed rate deal would protect you from any significant interest rate spike, at least for a few years.

Which scenario is more likely? The truth is, nobody knows. We would say, though, that taking out a variable rate mortgage might not be worth the gamble under current uncertain circumstances – you could win a little, or lose big, so a good fixed rate deal will at least allow you to relax a little, for a while.

BY ANNA COTTRELL

Source: Real Homes

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UK mortgage approvals hit six-month low in September – UK Finance

The number of new mortgages approved by British banks hit a six-month low in September, according to a survey that adds to signs the housing market is slowing again ahead of the October Brexit deadline.

Industry body UK Finance said banks approved 42,310 loans for home purchase in September, compared with 42,527 in August, according to seasonally-adjusted data. However, the number of approvals for remortgaging rose to the highest level since November 2017 at 32,649.

UK Finance said annual growth in consumer credit rose to a 19-month high of 4.5%, driven by personal loans and overdrafts rather than credit card lending.

Reporting by Andy Bruce, editing by David Milliken

Source: UK Reuters

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Second charge mortgage market volumes rise by 12%

Second charge agreements were up 12% year-on-year in August, the latest figures from the Finance and Leasing Association have revealed.

There were 2,343 new second charge agreements in August.

The value of new second charge business saw a yearly increase of 10% at £102m.

Fiona Hoyle, acting director general and head of consumer and mortgage finance at the FLA, said: “The second charge mortgage market recorded its 12th consecutive month of double-digit new business growth in August.

“In the first eight months of 2019, new business volumes were 21% higher than in the same period in 2018.”

Richard Tugwell, intermediary relationship director at Together, added: “It’s clear that secured borrowing is growing in popularity.

“People are increasingly recognising it as a cost-effective way of securing funding for a range of needs, from house improvements to debt consolidation, while intermediaries recognise the importance of including a second charge option in their advice and recommendations.

“It is gaining more traction as an alternative to unsecured lending or re-mortgaging where factors such as redemption penalties, existing lender further borrowing policy and short term funding rates make these solutions less viable.”

Martin Stewart, director at The Money Group, commented: “ It is great news for a great product and some of the hard work being done by the industry to educate brokers about second charge mortgages.

“We have not necessarily seen an increase ourselves, our enquiries tend to arrive like buses and then it could be months before we see another one.

“One aspect that we should keep an eye on is whether second charge lenders are advancing because first charge lenders are retreating.

“We are without doubt entering a period of uncertainty and it will be interesting to see who has an appetite to continue lending.”

Robert Owen, managing director of mortgages and bridging at United Trust Bank, said: “It’s pleasing to see continued growth in the second charge marketplace as new products and technology has been brought into the market to improve the customer journey and the service to our brokers.”

Pete Mugleston, managing director at Online Mortgage Adviser, also commented: “We’ve seen an increase in enquiries and customers searching for alternative products to more traditional remortgages, with many homeowners opting to renovate and extend their property over moving and citing reasons such as increased cost (tax), the potential for further house price reduction (buying at the wrong time) and a lack of suitable property on the market to move to.

“It appears as though with the uncertainty around currently, whilst we’re still having record numbers of purchase enquiries, movers aren’t quite sure it’s the right time and more are deciding to stay put.”

Kevin Thomson, sales director at Connect for Intermediaries, believes more education is needed.

He said: “We always look for the best solution for the end client and often a remortgage can be better.

“We feel there is still a lot of education needed for mortgage brokers to really understand seconds and look at second charges and the variety of different purposes they can be used for.”

By Michael Lloyd

Source: Mortgage Introducer

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Mortgage approvals drop in August

Mortgage approvals for house purchase declined in August, the Bank of England’s Money and Credit statistics have found.

The number of approvals fell to 65,500 in August, in contrast to the 18-month high of 67,000 in July.

Andrew Montlake, managing director of Coreco, said: “Mortgage approvals for house purchase in August were down on July but held up fairly well once you factor in the seasonal drop-off.

“Three years of delay and indecision have created a phenomenal amount of pent-up demand and that saw house purchase mortgage approvals in August stay at the six-month average.

“Expect mortgage approvals in the Autumn and winter to be even more robust, as mortgage enquiries for home purchase really picked up in September.

“Despite a backdrop of political, economic and now constitutional chaos, the property and mortgage markets are ticking along quite well.

“There may be gridlock in Westminster but most Brits are now getting on with their lives.”

Whilst net mortgage borrowing by households dropped to £3.9bn in August, this followed a strong net flow of £4.5bn in July.

This was in line with the average seen since 2016.

The annual growth rate was unchanged at 3.2%, which is also in line with growth rates seen in the past three years.

Rob Barnard, sales director at Masthaven, added: “We have seen a downturn of lending in August, which may be in part led by the continued political uncertainty and the heightened chance of a no deal Brexit.

“However, despite the fall in net mortgage borrowing, the appetite for purchasing property has remained relatively strong keeping in line with the average seen since 2016.

“It seems that by and large, the market is not too concerned with the political turmoil of late. This is supported by our findings that in our Broker Beat research that found that 89% of brokers are confident about the prospects for their firm.

“The UK is still a desirable place to own a property and lenders are innovating to ease the application process for mortgages to deliver excellent customer service, paving the way for specialist banking to become the new norm.”

Vikki Jefferies, proposition director at PRIMIS, added: “Whilst mortgage lending for August was lower than July’s, mortgage advisers are continuing to do a great job of securing the right deals for borrowers – despite the political and economic uncertainty.”

Kevin Roberts, director at Legal & General Mortgage Club, remained optimistic.

Roberts said: “Wider political uncertainty is undoubtedly on the minds of consumers, but the mortgage market remains strong.

“Housing schemes like Help to Buy and innovation from lenders, such as family support mortgages are giving younger borrowers in particular more options to join the property ladder.

“Competition in the sector is rife and there are also some great deals available for those looking to buy or remortgage, especially if they speak to an adviser.

“These experts can give borrowers access to thousands more mortgages than if they went direct to a lender and 95% of consumers who used an adviser would likely recommend their family or friends do the same.”

Similarly, David Copland, director of mortgage services at TMA, added: “Whilst mortgage lending in August weakened, attractive deals, increased lender competition and the economic climate are incentivising people to act.

“Mortgage advisers are steering borrowers in the right direction and finding the best product for their circumstances.

“Remortgage business is a clear opportunity. Now is the time for advisers to be contacting any customers who are approaching the end of their term.”

Kate Davies, executive director of the Intermediary Mortgage Lenders Association, said that although mortgage lending remains consistent and stable in the face of ongoing political uncertainty, issues in the market still need to be solved.

She said: “Mortgage lending remains consistent and stable in the face of ongoing uncertainty in Westminster.

“Borrowers are still keen to press ahead with their plans to step onto or up the housing ladder and our research shows that advisers remain confident about the future of the mortgage market.

“However, there are still challenges facing the sector that must be addressed. As a priority, we need to replace the Help to Buy scheme, which has supported over 220,000 housing transactions since 2013.

“The market is already responding by providing more options for first-time buyers, such as higher loan-to-value mortgages, but it can still be hard for younger buyers to meet the stringent requirements of the current affordability rules.

“We need more dialogue between lenders, builders, regulators and the government to forge a coherent policy which supports responsible lending on good quality properties designed for younger buyers and those on lower incomes.”

By Michael Lloyd

Source: Mortgage Introducer

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Mortgage boom helps drive northern powerhouse

The mortgage market is booming in the North of England with the number of first-time buyers soaring to a pre-financial crisis high.

Figures released today by UK Finance revealed, in 2018, the mortgage industry helped nearly 85,000 households buy their first home in the region – which is made up of the North West, North East and Yorkshire and Humber.

This is an increase of 3% on the previous year and is the highest level since 2006, according to UK Finance which is publishing the data to coincide with its ‘Northern Powerhouse’ dinner to discuss how financial services can support the region’s economy.

These strong figures, it suggested, were down better affordability in regions of the North, where the average deposits and income multiples were lower than anywhere else in England. It said there was an increase of 1.1% in the number of home movers.

Buy-to-let hotspots

It wasn’t just residential mortgages which were helping to drive the boom. Newcastle, Liverpool and Hull bucked the national trend and experienced strong growth in buy-to-let lending, UK Finance revealed.

It said this had been driven by lower house prices and a healthy labour market as well as strong rental demand. This allowed landlords to achieve higher yields than the UK average.

The growth in Hull was particularly strong – with buy-to-let lending soaring by 12.8%.

Jackie Bennett, director of mortgages at UK Finance, said: “These figures show the North of England has a strong and dynamic mortgage market, with lenders helping thousands of first-time buyers onto the housing ladder.

“This has been combined with a steady increase in home movers, making it easier for buyers to find a property that suits their needs.

She added: “The mortgage industry stands ready to work with the UK government and local authorities to capitalise on these strengths and help deliver on the full economic potential of the Northern Powerhouse.”

Strong regional disparities

While the figures were good news for the North of England, they also exposed weaknesses in other parts of the UK, particularly in London.

Shaun Church, director of Private Finance, said they highlighted the strong regional disparities in both housing demand and activity.

“Comparatively low property prices and strong rental demand makes the North an attractive prospect for landlords,” he said.

“After years of being slammed by regulatory changes making it harder to turn a profit, investment location has never been more important. Northern regions are still enjoying decent house price growth, meaning landlords can also enjoy an increase in the value of their asset.”

By Kate Saines

Source: Mortgage Finance Gazette

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New research sheds light on mortgage cashback

Stamp duty, home improvements or immediately starting to pay down their new mortgage are all ways homebuyers would spend cashback from lenders, Leeds Building Society has discovered.

The society carried out national research among 1,224 people into mortgage cashbacks to find out whether borrowers valued this option and how they would spend this cash.

There were four top priorities:

25% would use cashback to cover the costs of removals or storage
24% would pay legal or other professional fees
24% would put the money straight into overpaying their new mortgage
23% would cover maintenance or improvements they were expecting in their new home, such as a boiler service.

There was a difference in behaviour between residential purchasers and buy-to-let landlords.

A third of borrowers buying a residential property (32%) were most likely to settle professional services’ bills with their cashback, whereas 51% of buy-to-let purchasers favoured putting the cashback straight into overpaying their loan.

Matt Bartle, Leeds Building Society’s director of products, said: “Everyone’s requirements will be individual to them, which is why we offer different combinations of fees, features and incentives across our mortgage product range.

“For that reason we offer incentive packages which give borrowers plenty of choice, not only on the rate and term of their mortgage, but also to help with the other costs of moving home or remortgaging.

“Building on our market knowledge and long experience of mortgage lending, we continue to test ideas and ask borrowers what they need, so we can develop the product deals and lending criteria which will help more people to have the home they want.

“Of course, borrowers can choose how to spend their cashback and it’s positive to see that people would use the funds to cover costs associated with moving and in some cases overpay to reduce the size of a loan immediately.”

Leeds Building Society has a variety of no fee cashback mortgages available, including:

3.49% two year fixed rate shared ownership mortgage up to 90% borrower share with £500 cashback
2.49% five year fixed rate buy-to-let mortgage up to 60% loan-to-value with £1,000 cashback

By Joanne Atkin

Source: Mortgage Finance Gazette

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Could a no deal Brexit affect your mortgage? This is what the experts say

Is the reaction of the markets to a threatened no deal Brexit – or even an orderly Brexit – worrying you? How might it affect your finances, your mortgage repayments or even your chance of securing a new mortgage from your lender?

Some good news: the Bank of England has just announced that it will be holding the interest rates at 0.75 per cent for now. But if you are home owner, or only just looking into getting a mortgage as a first-time buyer, what does this announcement mean for you?

Martijn Van Der Heijden, Chief Strategy Officer at online mortgage brokerage Habito, comments on the implications of the decision for both first-time buyers and those already with a mortgage, ‘Interest rates remain relatively low which will be welcome news for those looking to get a good deal on their mortgage. This “wait and see” approach from the MPC (Monetary Policy Committee) is something we also see reflected in our own data with a surge in buyers choosing fixed deals for five years or more as they try to “Brexit-proof” their mortgage and lock in the same rate until 2024 and beyond.

‘We have also seen positive figures recently on the take up of buy-to-let and first time buyer mortgages, something which has led to lenders offering more competitive products to support people moving.’

A no deal Brexit could mean a sharp rise in inflation and the fall of the pound, which would mean that the Bank would need to reconsider interest rates, either raising or lowering them depending on what’s needed to support the economy.

So, it looks like now could be the time to consider securing the best fixed-rate mortgage if you are buying your first home or remortgaging. Doing this now could make particularly good sense given the stark warning the Bank of England has issued about the potentially detrimental effects of Brexit on the UK economy. And it will give you certainty. No bad thing in these uncertain times.

BY ANNA COTTRELL

Source: Real Homes

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Homeowners Opting for 5-Year Fixed Deals for Remortgages

Homeowners who are remortgaging are responding to economic uncertainty by locking in interest rates for up to five years on their new loans.

In July, 50% of remortgage borrowers choose five-year fixed rate products, the highest percentage ever recorded and up 4% from June.

Overall, there were 52,869 remortgages arranged in July, the latest LMS monthly remortgage snapshot report revealed. Of these, the vast majority (96%) were fixed rate deals. Just 3% of remortgage borrowers choose tracker or variable rate mortgages.

Two-year fixed rate deals were the second most popular, the choice of 34% of remortgage borrowers.

Nick Chadbourne, LMS chief executive officer, said: “We’ve seen five year fixes grow in popularity for some time now. This month saw the highest number recorded, with half of borrowers choosing to fix for this length of term. In previous years, two year fixes were the norm, but now only a third of borrowers choose this length as they opt for longer terms.

“This is likely to be a reflection of wider market uncertainty and borrowers wanting to take control of their mortgage payments for a longer period of time,” he added.

42% of remortgage borrowers in July increased their loan size, while 34% kept their mortgage balance the same and 24% reduced the amount borrowed. 44% saw their monthly mortgage payments rise, and 42% will enjoy lower bills in the future.

The number of remortgages was down 1% between June and July, but as the wider housing market contracts, remortgages are the one area showing health.

Figures from UK Finance showed that remortgages were up 8% in June, compared to the previous year, even as home mover, buy to let, and first time buyer mortgages slumped.

Strength in the remortgaging market indicates that homeowners, wary of the expense of buying a new property and a potential Brexit-driven crash in prices, are making do with their current homes. They’re borrowing more to fund their renovation, rather than upsizing.

Source: Money Expert

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UK mortgage approvals hit two-year high in July as market stabilises – BoE

British lenders approved the greatest number of mortgages in two years during July, adding to signs the housing market has stabilised from its pre-Brexit slowdown, official data showed on Friday.

The Bank of England said lenders approved 67,306 mortgages, up from 66,506 in June and more than any economist predicted in a Reuters poll that had pointed to 66,167 approvals for July.

Britain’s housing market has sagged since the 2016 Brexit referendum – especially in London and neighbouring areas – but has shown signs of a tentative recovery in recent months.

Earlier on Friday mortgage lender Nationwide said house price growth in annual terms inched up to a three-month high in August, although remained weak by recent standards.

The BoE said net mortgage lending rose by 4.611 billion pounds in July, the biggest increase since March 2016, while consumer lending increased by 0.897 billion pounds compared with a forecast rise of 1.0 billion pounds on the month.

Lending to businesses fell by 4.218 billion pounds last month, the sharpest fall since August 2017. While the series is volatile, the severity of the fall could be another sign of nerves in British companies as the Brexit crisis escalates.

Earlier on Friday Lloyds Bank said business confidence fell in August to its lowest level since late 2011.

Source: UK Reuters