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Bank of England: Mortgage borrowing reaches five-year high in February

Individuals secured an additional £6.2 billion in mortgage borrowing in February which is the strongest level since March 2016, the latest Bank of England (BoE) figures have revealed.

The latest data showed it was not just net borrowing which was buoyant last month, but there were also a high number of approvals.

The 87,700 approvals, although down on the peak of 103,700 in November 2020, were still well above the monthly average in the six months to February 2020, which was 67,300.

The BoE Money and Credit report for February 2021 also reported approvals for remortgages with a different lender increased slightly from 32,600 to 34,300 between January and February.

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When it came to gross borrowing the figure reached £27.7 billion which was very close the March 2016 figure of £27.9 billion.

The BoE data also revealed the ‘effective’ rate – the actual interest rates paid – on newly drawn mortgages increased by six basis points to 1.91% in February.

It said this was slightly higher than the rate in January 2020 (1.85%), and compared with a series low of 1.72% in August 2020. The rate on the outstanding stock of mortgages remained at series low (2.09%).

The BoE thought the strong borrowing figures were caused by the flurry of activity as buyers rushed to meet the original stamp duty holiday deadline of 31 March.

But John Phillips, national operations director, Just Mortgages and Spicerhaart said thought there were other influencing factors at play.

He said: “This is only part of the story. A year on from the start of the first lockdown, what is clear is that the pandemic has spurred people into action.

“Whether it is those looking to move for more outside space. Or the lack of commute meaning some are choosing to leave the city, in a year where our lives were turned upside down, priorities were shaken up.

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“With the extension to the stamp duty holiday, the reintroduction of 95% LTV mortgages and the furlough scheme running till September, the property market should keep moving at a pace and we may see records broken for the first quarter of 2021.”

Meanwhile Jonathan Sealey, CEO of specialist short term lender Hope Capital, said the figures were also testament to the hard work of everyone involved with the property and mortgage industry.

“All those involved in the sector should take credit for that, and initiatives such as virtual viewings and the introduction of new products during the lockdown, have contributed to the property market staying operational,” he said.

“It’s also been an opportunity for specialist lenders particularly who have been able demonstrate the agility and speed that sets them apart from high street lenders, in ensuring people can get their deals over the line, no matter what else is happening.”

By Kate Saines

Source: Mortgage Finance Gazette

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Mortgage approvals jump to four-year high in December

Mortgage approvals surged in December to a four-year high, data published on Monday showed.

According to UK Finance, the banking lobby group, house purchase mortgage approvals by the main high street lenders rose to 46,815 in December from 44,058 in November, the highest number since August 2015. Analysts had been expecting the figures to remain largely flat, at around 44,000.

Gross mortgage lending across the residential market was £22.2bn in December, bringing the total for 2019 to £265.8bn, 1.1% lower than 2018’s figure. A total of 982,286 mortgages were approved, a 7.4% increase on the previous year.

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Howard Archer, chief economic advisor to the EY ITEM Club, said mortgage approvals would have been “significantly lifted by increased confidence and reduced uncertainties” following December’s general election.

He continued: “Prior to November, mortgage approvals for house purchases had fallen back for three successive months to be at a seven-month in October, indicating that activity was being pressurised by heightened uncertainties over the domestic political situation and Brexit.

“Housing market activity, and possibly to a lesser extent prices, could be given a modest lift in 2020 if the government introduces specific measures aimed at boosting the sector in the Budget. Furthermore, mortgage interest rates are at historically low levels; indeed there is clearly a real possibility that the Bank of England could cut interest rates in 2020.

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“However, the economy still looks set for a pretty challenging 2020, so the upside for house prices is likely to be limited. Furthermore, Brexit concerns could very well pick up again as 2020 progresses, due to concerns over what will happen at the at the end of the year if the UK and European Union have failed to reach agreement on their long-term relationship.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The jump in mortgage approvals in December likely solely reflects the stimulus provided by the sharp fall in mortgage rates in the second half of last year; the additional boost to approvals from the result of the general election is still to come. All the evidence so far points to a further rise in demand after the election. The new buyer enquiries balance of the RICS Residential Market Survey leaped in December to its highest level since January 2019.”

UK Finance also said that credit card spending rose 7.3% year-on-year to £11.8bn in December, with repayments continuing to offset spending, meaning the overall level of borrowing through cards grew at a slower rate of 2.4% annually.

Personal borrowing through loans was 14% higher year-on-year, while overdraft borrowing eased 0.8%.

Previously the British Bankers Association, UK Finance represents more than 250 firms.

By Abigail Townsend

Source: ShareCast

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Mortgage approvals reach to highest level since 2007

The number of mortgage approvals in November 2020 increased to the highest level since August 2007, according to the Bank of England Money & Credit data.

The number of mortgage approvals reached 105,000 in November, with net mortgage borrowing also increasing to £5.7bn.

In addition, effective interest rates on new mortgage borrowing ticked up to 1.83%.

Household deposits increased by £17.6bn in November, however there were significant withdrawals from national savings and investment accounts according to the data.

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Bank borrowing by small and medium-sized businesses was noted at £1.8bn, while net borrowing by large businesses was £0.2bn.

Tomer Aboody, director of property lender MT Finance, said: “The Bank of England figures provide further confirmation of the prevailing strength and confidence in the housing market, with the highest mortgage approval levels and further borrowings in over a decade.

“Households are looking to maximise space in their current homes by extending, converting lofts and refurbishing, as more time is spent at home.

“With mortgage rates so low, taking advantage of existing equity in homes has enabled people to borrow more for living expenses as they also deal with concerns over future employment and income, with so many industries affected by the pandemic.

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“Household deposits have increased with people saving, due to not being able to go away, out for dinners or even shopping.

“Consumers are being frugal with their spending and considering the threat of a possible recession on the horizon.

“How the government will look to tackle any forthcoming concerns with the Budget, the end of furlough and stamp duty relief will be interesting, since this new wave of the virus has come as a surprise and therefore further potential assistance is desperately needed.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, added: “Not surprisingly, the mortgage market improved considerably at the end of the year but we shouldn’t look too closely at these figures because they reflect a period of particular improvement in market activity of the previous few months.

“Moves have slowed since although many are still trying hard to take advantage of the stamp duty holiday, which will be ending very soon.

“The likelihood of further lockdown restrictions will bring short-term pain to the market which hopefully won’t be reflected in reduced values.

“Certainly the greater availability of a vaccine, on the other hand, will provide some optimism.”

By Jake Carter

Source: Mortgage Introducer

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Mortgage approvals at 13-year high

UK lenders approved 97,532 mortgages in October, the most since September 2007, the Bank of England’s Money and Credit data shows.

The housing market has gotten busier, as there were 92,091 given the green light in September, compared to 85,704 in August.

Before the pandemic the were 73,384 mortgages approved in February, before the amount fell as low at 9,335 in May.

Nitesh Patel, strategic economist for Yorkshire Building Society, said: “The housing market continues to defy economic logic, despite challenging economic conditions caused by the global Covid-19 pandemic and uncertainty over the UK’s trading deal with the EU.

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“Pent-up demand from the lockdown has been driven by buyers looking for bigger homes that accommodate home working and more garden space, as well as the Stamp Duty cut may have drawn in opportunistic buyers who were previously discouraged by high transaction costs.

“There is good reason to believe that homeowners with large amounts of equity in their homes are the most active, with first-time buyers making up a smaller proportion of approvals.

“These are temporary factors, particularly the Stamp Duty cut which, as it currently stands, ends on 31 March next year. With the economy set to remain weak and unemployment likely to rise when the job support scheme comes to an end, we should see housing activity start to decline in the second quarter of 2021.”

But Richard Pike, sales and marketing director at Phoebus Software, said: “It is not only the stamp duty saving that is driving the market, there is also the number of people looking to escape city life since the lockdown. And, as the ‘working from home’ culture continues this is likely to endure past the limitations imposed by Covid-19.

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“The problem then will be the age-old one of supply and demand. Despite the government’s promises, we are, according to the ONS last week, way behind our target for new housebuilding in the last year. With the knock-on effect of the pandemic, this is something that isn’t going to be fixed quickly. So, the mass exodus from our cities that has been predicted, could turn into a trickle come the spring.”

Tomer Aboody, director of property lender MT Finance, said: “This is an opportunity for many would-be buyers who in the past couldn’t afford or preferred not to buy, to go and purchase, locking themselves into a longer-term mortgage rate at an affordable level, and with a low enough deposit so that it doesn’t impact their savings too much. This, coupled with the stamp duty break, has fuelled the market and helped push up property prices.

“Unlike 2007, we should be confident in the banking sector, which is highly liquid, as well as confident in the market. We may be living with a pandemic but hopefully this will be under control before long, allowing us to carry on with our lives before too much damage is done to the economy.”

BY RYAN BEMBRIDGE

Source: Property Wire

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Mortgage approvals hit 13-year high as UK housing market booms

Mortgage approvals last month reached their highest number since September 2007 amid pent-up demand in the housing market, the latest figures from the Bank of England show.

The number of mortgage approvals for house purchases increased to a 13-year high of 91,500 in September from 85,500 in August.

The September approval figures were 24% higher than approvals in February, before the coronavirus pandemic.

Households borrowed heavily to purchase property in September, with net mortgage borrowing at £4.8bn, up from £3bn in August.

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It is the latest evidence that the recovery of the housing market post-lockdown is continuing, with the average asking price of homes coming on to the market in Britain now at a record high, supported in part by the existing stamp duty holiday.

Craig McKinlay, new business director at Kensington Mortgages, commented: “The temporary reform of stamp duty and pent up demand has provided a boost for the property market. Despite there being less product choice available, September is traditionally a busy month of activity for the market, and mortgage approvals have shot up to their highest rate since September 2007.”

But McKinlay says that these results do not reflect the fact that many first-time buyers and self-employed borrowers are being left behind “in this mini-market boom – unable to take advantage of the stamp duty holiday”.

He added: “Mortgage lenders need to be as flexible as possible to accommodate these individuals and use manual underwriting approaches to assess an individual’s affordability on a case by case basis.”

With payment holidays and the government’s furlough scheme coming to an end, lenders will be faced with another priority – supporting borrowers who continue to face financial hardship beyond October, according to Steve Seal, managing director at Bluestone Mortgages.

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He said: “While additional support will be crucial for many households, the harsh reality is that this will impact people’s credit scores and, as a result, they may not be eligible for mainstream lending later on.

“Therefore, it is likely that many borrowers will need extra support in the future when it comes to securing financing, and the specialist market will be essential for providing these individuals with the lifeline they need.

“This is why it is important that specialist lenders work closely with brokers to prepare for the long-term implications of Covid-19, so they can meet the heightened demand from consumers expected over the coming years with efficiency.”

By MARC DA SILVA

Source: Property Industry Eye

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Mortgage approvals reach 13-year high

Mortgage approvals for house purchase increased to 84,700, the highest since October 2007, according to the latest Money and Credit statistics from the Bank of England.

Net mortgage borrowing was £3.1bn in August which stayed consistent with the total recorded in July (£2.9bn), whilst effective mortgage interest rates were broadly unchanged.

The Bank of England suggests that these latest figures signal signs of recovery in August, despite mortgage borrowing being troughed at £0.5bn in April and still being slightly below the average of £4.2bn in the six months to February 2020.

The increase on the month reflected slightly higher gross borrowing of £18.8bn, although it is still below the pre-COVID level in February of £23.7bn.

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

Gareth Lewis, commercial director of property lender MT Finance, said:

“The impressive pick up in mortgage approvals is what you would expect – if we go all the way back to Brexit, there has long been pent-up demand and people waiting to move, COVID then hit and people were still waiting.
“Now, there are so many ‘for sale’, as well as ‘sold’ signs, illustrating that there is confidence and a willingness to invest in property.
“Consumer credit has bounced back and stabilised, which is encouraging as it shows people are not over-stretching themselves by increasing debt and getting into financial difficulty. People are maintaining a grasp of reality.”

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Approvals for remortgage are little changed compared to July at 33,400, which is a 36% decrease from figures recorded back in February.

New mortgage rates were 1.72%, a decrease of one basis point on the month, whilst the interest rate on the stock of mortgage loans fell one basis point to 2.14% in August.

Dave Harris, chief executive at more2life, reacted to the data: “Although today’s findings show overall lending in the mortgage market still falls short of pre-crisis levels, there are positive signs of growth.

“Month-on-month increases to new mortgage approvals suggest that buyers have been taking advantage of the products on offer to help manage borrowing during the coronavirus crisis – and lenders and advisers have played a crucial part in this.

“At the same time, the equity release market has also been working hard to support older borrowers, with product innovation high on the agenda.

“The Equity Release Council recently found that product options in this market have increased by 29% year-on-year, further helping to ensure older borrowers benefit from greater choice and flexibility at a time when they arguably need it most.

“Seeking professional, specialist advice is crucial for older homeowners ensure they are aware of solutions like equity release which could help them develop a long-term financial plan.”

David Whittaker, chief executive at Keystone Property Finance,  added: “There were no signs of the traditional summer slump this August, with the mortgage market experiencing a ‘mini boom’ and showing positive signs of recovery following an extremely challenging period.

“Within the buy-to-let market, falling rates, pent-up demand and the Stamp Duty holiday have no doubt acted as an incentive for landlords and investors to take this opportunity to diversify their property portfolios.

“However, whilst today’s figures give us reason to be cautiously optimistic about the market, a raft of regulatory changes coming into force this year means buy-to-let investors must continue to seek the advice of brokers who can help them navigate this complex landscape.

“As we start to emerge from the crisis and the UK returns to some form of normality, we’re committed to working closely with our broker partners to ensure the market can meet the unique needs of each buy-to-let landlord.”

By Jessica Nangle

Source: Mortgage Introducer

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Borrowing is on the way to returning to healthy levels

Despite Bank of England figures that showed mortgage approvals hit a record low of 9,300 in May, there are signs that borrowing is returning to normal levels, according to Hometrack.

The Bank of England’s Money and Credit Report showed that households repaid more loans than they took out in May, but that there was still a small increase in mortgage borrowing.

On net, households borrowed an additional £1.2bn secured on their homes, higher than £0.0bn in April, but weak compared to an average of £4.1bn in the six months to February 2020.

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David Ross, managing director of Hometrack, said: “The data released by the Bank of England is encouraging and shows that borrowing, while not at pre-COVID levels, is certainly returning.

“On a more positive note our data for June shows continued growth and is up on the same period in 2019.”

For the market to return to normal, Ross added, providers must continue to innovate and focus on the customer.

He said: “Continued stimulus is key to maintaining this growth.

“We urge mortgage providers to focus on delivering the very best customer experience, removing complexity through digitisation and ensuring fewer barriers to borrowing.

“This in turn will help grow new lending, helping the economy get back on its feet after the shock of COVID.”

By Jessica Bird

Source: Mortgage Introducer

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London and the south buck the trend as mortgage market flattened in Q1

The coronavirus pandemic may have flattened mortgage approvals across the UK but there are still hotspots of activity, UK Finance data has revealed.

A household finance review for the first quarter of 2020 by banking trade body UK Finance shows mortgage approvals slumped on average across the country but still increased in some parts for first-time buyers and home movers.

This suggests there could still be demand for estate agents to tap into now the market has reopened.

The figures show that mortgage approvals for first-time buyers fell across the UK but were up in the south east of England and London by 3% and 5% respectively during March when the market was on lockdown.

There were large drops elsewhere though, with approvals in Yorkshire down 16% and the north of England registering 20% drop.

The data also shows that while approvals for home mover mortgages were down overall, they rose in each month of the first quarter of 2020 in London, the south east of England and Northern Ireland.

Home mover approvals were also up annually in Wales, the south west of England and East Anglia during March but fell by more than 10% in the north of England and in Scotland.

There was some good news for the lettings sector as buy-to-let approvals rose 7% over the quarter.

UK Finance also warned of a modest pick-up in arrears towards the end of the quarter as the Covid-19 pandemic began to impact home owners, but said the level is still lower than a year ago.

The trade body said:

“It is likely that the significant disruption to activity over the quarter is creating some noise in the data and a clear picture of how trends have evolved in different parts of the country should become more apparent in the coming quarters.

“While regional house purchase year-on-year growth shows variances, the picture for the whole of the UK was fairly flat.”

By MARC SHOFFMAN

Source: Property Industry Eye

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Mortgage approvals surge to four-year high: BoE

Mortgage purchase approvals rose by 4.4% between December and January to 70,900 – the highest figure seen since February 2016, according to the latest Money and Credit statistics from the Bank of England.

Approvals for remortgage also rose on the month, by 3.9%, to 52,100.

Net mortgage borrowing – which lags approvals – by households was £4.0 billion in January, slightly below the £4.3 billion average seen over the past six months.

Director of Benham and Reeves, Marc von Grundherr, said: “The highest rate of mortgage approvals in almost three years and particularly so early in the year is yet further proof, if it were ever needed, that buyers are returning in their droves following December’s election result.

It is this huge influx of demand that has seen prices increase at such notable rates of late and as a result, the market is now in the best shape it’s been since the EU Referendum itself.

Not only are seeing performance exceed expectations but there is a very real chance of an interest rate cut on the horizon, which will further boost buyer sentiment, borrowing, and overall market performance.”

Vikki Jefferies, proposition director at Primis, commented: “With the support of a professional, borrowers will be better-informed on how to manage their finances in the long-run and are less likely to fall into a mortgage deal that could leave them financially worse off.

“Advisers are also a big help for clients whose circumstances change during their term, having the resources to be able to offer customers a better deal that aligns with their new financial situation.”

By ROZI JONES

Source: Financial Reporter

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EY: Mortgage lending growth forecast to rise 4.1% in 2020

Whilst mortgage approvals rose in December 2019 to the highest level since 2017, overall mortgage lending growth is only set to rise 4.1% this year according to EY.

In its latest ‘EY ITEM Club Outlook for financial services’, EY predicts subdued growth despite the General Election result and clarity on the first stage of Brexit.

Omar Ali, UK financial services managing partner at EY, said: “2020 began with increased political certainty which is positive for consumer and business confidence, and the growth in lending at the back end of 2019 has given cause for cautious optimism.

“However, it is still too early to tell whether these early green shoots will translate into a full and sustained economic recovery this year which will drive growth for financial services firms.

“It is very early days in the negotiations for the new UK-EU trading relationship, with expectations that any financial services deal will be hard fought.

“On top of that, all businesses are facing additional and significant challenges from wider global geopolitical uncertainty and the yet unknown economic impact of coronavirus.

“The industry will be watching how the next few months play out very carefully.”

Year-on-year unsecured consumer credit growth rose in December to 6.1% from 5.9% in November, however the 3.2% growth forecast for this year is the lowest in six years, down from 3.7% last year and significantly down from the 2017 peak of 8.3%.

On the supply side, there has been some tightening in credit conditions in the unsecured lending market.

Having run at an expected 3.7% last year, the growth in stock of consumer credit is forecast to slow to 3.2% this year, before rising to 4% in 2021.

Overall mortgage lending growth is forecast to rise 4.1% this year and 3.9% in 2021, which is close to the average of the last five years and well down on pre-financial crisis rates.

Despite historically low interest rates and accommodative loan-to-value ratios, affordability remains a key challenge for prospective homebuyers.

In Q3 2019, the average house price was equal to 4.7 times the average borrower’s income.

Dan Cooper, head of UK banking at EY, added: “Whilst there are early signs that consumer confidence might begin to pick-up following the General Election, lending growth is expected to remain pretty uninspiring over the next couple of years and the low interest rates will continue to squeeze net interest margins.

“The structural changes taking place in the car market, combined with a sluggish property market and an increasing trend of firms looking outside of the traditional bank borrowing model for finance, are visibly impacting banks’ profitability.

“It’s vital that the banks assess their business models and strategies to ensure they reflect the reality of low lending growth and can continue to ride out this challenging economic time.”

As for home insurers, prices for home policies rose 2.3% in December, up from a recent low of -1.4% in April 2019.

In Q4 2019 housing transactions, an important driver of big-ticket and insurable household purchases, rose 0.7% on a year earlier.

But this followed drops in the previous two quarters and still left transactions below the level in mid-2017.

The housing market has remained subdued however a pick-up in December following the election result has suggested that improved sentiment could give a boost to homebuying.

Overall, the EY ITEM Club Outlook for financial services shows non-life premium income growing 3.1% this year, up from an estimated 2.7% in 2019, before climbing to 3.9% in 2020.

Ali concludes: “A good Brexit outcome will continue to lay positive foundations for future growth, but there are deeper, structural changes and important emerging trends in both consumer and business finance which the industry needs to tackle.

“In this context, financial services firms need to reconsider the role they will play in helping their customers navigate change.

“They have put the customer first in their response to Brexit and now need to do the same on climate change, trade and geopolitical unrest.”

By Jessica Nangle

Source: Mortgage Introducer