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UK mortgage approvals at highest levels since 2007 says Bank of England

THE number of mortgage approvals made to home buyers in Britain and Northern Ireland jumped to its highest levels since 2007 in August, the Bank of England said.

Some 84,700 approvals for house purchase were recorded, marking the highest number since October 2007, according to the Bank’s money and credit report.

The Bank said the jump only partially offsets weakness seen between March and June.

In total, there have been 418,000 approvals in 2020, compared with 524,000 in the same period in 2019.

The housing market was effectively closed for business earlier on this year, when social distancing measures due to Covid-19 made the process of home buying and selling very difficult.

The subsequent easing of measures, combined with a stamp duty holiday announced in July, have boosted the market.

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Propertymark reported this week that about one in eight homes sold in August went for more than the original asking price – marking the highest proportion in nearly five years.

Looking to the months ahead, some experts have predicted the prospect of rising unemployment and a dwindling number of low deposit mortgages as lenders shy away from “riskier” lending will dampen the market.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said a recent increase in mortgage rates, particularly for low deposit loans, “will make purchases unaffordable for many first-time buyers”.

He continued: “The outlook for a further drop in employment also will weigh on the housing market, though with home ownership having narrowed to a wealthier segment of the population over the last decade, job losses won’t have as devastating an impact on the market as they did in 2008.”

The report also showed that interest rates on overdrafts jumped in August.

The “effective” rate – the actual interest rate paid – on interest-charging overdrafts rose by 4.2 percentage points to 19 per cent in August.

This is the highest rate since similar records started in 2016 and compares to a rate of 10.32 per cent in March 2020, before new rules on overdraft pricing came into effect.

Under the new Financial Conduct Authority (FCA) rules, overdraft providers have to charge one single rate of interest rather than adding on other charges.

Before the coronavirus pandemic, many providers announced new rates which were around double what many people with an authorised overdraft had previously been on.

The FCA has introduced guidance for firms to help overdraft customers who have been facing temporary financial difficulties due to the coronavirus pandemic. As part of this, borrowers have been offered a temporary £500 interest-free overdraft buffer.

The report also said typical rates on new personal loans increased a little in August, to 4.71 per cent.

The typical cost of credit card borrowing was broadly unchanged at 17.95 per cent in August.

Households’ deposits increased by £5.2 billion in August. That was lower than the increase of £6.5 billion in July and below the average of £17.2 billion between March and June.

The returns savers were getting tumbled further in August. The effective interest rate on new deposits fell to a new low of 0.5 per cent, the Bank said.

Mr Tombs said the Bank’s report seems to reflect households returning to spending most of their income, following a period of “enforced” saving during the full lockdown in the second quarter of 2020.

He added: “High unemployment, however, likely will prompt households to maintain a large savings buffer over the next year, ensuring that spending does not exceed households’ diminished incomes over the coming quarters.”

Alistair McQueen, head of savings and retirement at Aviva, said: “A large proportion of households are likely to shift to precautionary saving in anticipation of further economic turmoil caused by the reintroduction of stricter local lockdown measures. This will dent consumer spending, which will curb the UK’s economic recovery.”

Source: The Irish News

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UK mortgage approvals jump as political uncertainty eases

Mortgage approvals have risen to their highest level since February 2016, data published by the Bank of England on Monday showed.

The central bank said there were 70,888 mortgage approvals for house purchase in January, a 4.4% improvement on December’s figure and the highest for 47 months. It was also comfortably above analyst expectations for around 68,000.

Remortgage rates also grew, by 3.9% to 52,100.

Net mortgage borrowing by households, which lags approvals, was £4.0bn, slightly below the £4.3bn six-month average. The annual growth rate for mortgage borrowing remained at 3.4%.

Howard Archer, chief economic advisor to the EY Item Club, said: “The data very much fuels the view that the housing market is currently benefiting markedly from increased confidence and reduced uncertainties following December’s general election.

“A stream of recent data and surveys suggest that the housing market has shifted up a gear after a lacklustre 2019, with particular softness around the third quarter.

“Certainly there is compelling evidence that the housing market has benefited from increased optimism and reduced uncertainties following December’s decisive general election, as well as a greater near-term clarity on Brexit.

“We had been expecting the housing market to continue to benefit in the near term from reduced uncertainties, but it is possible that concerns and uncertainties over the coronavirus outbreak could have an impact.

“We currently expect house prices to 3% over 2020.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The effective interest rate on all new mortgages dropped to 1.85%, from 1.88% in December, remaining well below the effective rate on the outstanding stock. As a result, the refinancing tailwind to growth in household’s disposable incomes remains on track to strengthen modestly this year. Lower mortgage rates also have underpinned the recover in house purchase mortgage approvals in January.”

The Bank also reported on Monday that the annual growth rate of consumer credit – defined as credit used by consumers to buy goods and services – remained at 6.1% in January. That represented growth of £1.2bn, above both the average seen over the last six months and the consensus, both of which were £1.0bn. The Bank said the rate was “stabilising after the downward trend seen over past three years”.

By Abigail Townsend

Source: ShareCast

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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 approvals tick up in April

Mortgage approvals — a leading indicator of mortgage activity and future lending — ticked up in April, according to new data from the Bank of England.

The BoE’s Money and Credit report, published today (May 31), showed the number of mortgage approvals for house purchase rose to about 66,300 in April — up slightly from the 62,559 measured for March.

Mortgage approvals show how many new loans banks have approved and that could be drawn, so capture the early stages of taking out secured lending against a property.

Therefore, they are a key indicator of current market activity and potential future lending.

However the number of approvals for remortgaging was broadly unchanged at around 49,400.

This is a turn in the market, as data released by UK Finance last month showed the number of people getting approved to remortgage increased by 11.1 per cent year-on-year in March and the number of people opting to remortgage is expected to reach a peak later this year.

The bank’s data also showed net mortgage borrowing remained strong for the second month in a row, totalling £4.3bn in April compared with the six-month average of £3.8bn.

The findings showed the annual growth rate of mortgage lending remained unchanged at 3.3 per cent, consistent with the level the market has seen since August last year.

Andrew Montlake, director of mortgage broker, Coreco, said: “Today’s buyer is spoilt rotten. Mortgage rates are obscenely low and, in the majority of cases, buyers are calling all the shots.”

Mr Montlake added that while the passing of the March Brexit deadline will have spurred some into action in April, a broader Brexit apathy was becoming stronger by the day.

He said: “April was the month when activity levels for brokers started to pick up and this was confirmed in the Bank’s latest data.

“People are increasingly of the view that, even if prices fall in the short-term following a potential no-deal Brexit, in the medium-term they will reap the benefits.”

He went on to say that while remortgages had been driving activity for some time, there had been a definitive pick-up in purchases over the past two months.

Richard Pike, marketing director at lending software firm Phoebus, agreed that remortgaging had played a big part in holding up the mortgage market over the past couple of years but said today’s figures showed it was levelling out.

He said: “The trend of people taking advantage of the stamp duty relief to move their current deals will have come to an end and we could see another uptick in the remortgaging figures next month.

“With household debt rising consistently, remortgaging to a better, less expensive deal is one quick way to reduce household spend and even consolidate some debt.

“The number of approvals for house purchase increased, which is a good sign for the whole market. As lenders offer better and better rates and deals, it is a good time for people to move up, or down, the ladder.”

By Imogen Tew

Source: FT Adviser

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House purchase mortgage approvals hit a three-month high

Home buyers have received some long-awaited good news as mortgage approvals for house purchase increased for the first time in three months, banks claim – but are they being driven by the return of 100% deposit “supersized mortgages?”

Lending data from trade body UK Finance shows mortgage approvals for house purchase were up 3.6% annually and 21.2% on a monthly basis to 45,289 during October.

Lending to home buyers had been falling since July 2018 and hit a six-month low in September.

The boost seems to have come at the expense of remortgaging, with approvals in this area down 13.5% year-on-year to 33,505.

The value of gross mortgage lending across the market in October was up 5.6% to £25.5bn.

It comes amid reports of the return of controversial “supersized mortgages,” which require little or no deposit and were seen as a cause of the 2008 financial crisis.

Comparison website Moneyfacts lists 16 different 100% loan-to-value mortgages that don’t require any deposit but do need a guarantor, which is usually a family member or a charge placed on another property or someone’s savings.

Bank of England data shows that a quarter of mortgages are now for 4.5 times someone’s salary or higher, compared with a fifth just three years ago.

Debt charities and mortgage brokers have warned it is important that borrowers aren’t stretched too far.

However, UK Finance doesn’t seem concerned.

A spokesman told the Daily Mail: “High loan-to-income mortgages are only likely to be available to those who have good prospects for wage increases, such as those in certain professional roles.

“Before they are able to offer any mortgage, lenders must undertake a strict affordability assessment in accordance with the rules outlined by the regulator.”

Source: Property Industry Eye