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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

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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.

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.

“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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Property market ‘up a gear’ as UK mortgages hit 10-year high

UK banks have approved the highest number of mortgages in 10 years, according to the latest data from industry group UK Finance on Monday.

Figures show 982,286 mortgages were approved by high street banks in 2019, 7.4% more compared with 2018, and amounting to total lending of £265.8bn ($203bn).

2019 also marked the highest annual total for mortgage approvals since 2009 — when 986,742 home loans were handed out — suggesting the property market is primed for ascendancy.

UK Finance said more than half a million (507,789) mortgages in 2019 were for house purchases, the highest annual level since 2015.

Seasonally adjusted figures also show that 46,815 loans for house purchases were approved in December — the highest monthly total since August 2015.

Howard Archer, chief economic adviser at forecasters EY ITEM Club, said: “December’s jump in mortgage approvals adds to a growing amount of firmer data and survey evidence suggesting that the housing market could well be changing up a gear.”

Last week estate agent Rightmove’s house price index showed UK property prices rising at the fastest monthly rate in 18 years. The index recorded its biggest ever monthly leap in asking prices, which came in at £306,810 in January, about £6,785 higher than a month earlier.

Archer also said that while the housing market may get a further near-term boost from reduced uncertainties, EY remained relatively cautious over housing market prospects for 2020 and suspects that the upside will likely be limited.

“Nevertheless, we have modestly raised our forecast for house price gains over 2020 to 2.8% from 2.0%, and there is a possibility that they could rise more than this. This partly reflects the fact that we have also modestly raised our UK GDP growth forecast for 2020 to 1.2% from 1.0%.

“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 on 11 March,” Archer said.

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 still is to come.”

He said 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.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “2019 turned out to be a strong year for the mortgage market, even with disruptive headwinds caused by Brexit and a general election. Lenders remained keen to lend and offered the rock-bottom mortgage deals to prove it.

“With transactional levels low, many lenders didn’t do as much lending as they would have liked, which means there is plenty of cash left in the pot for this year.”

In November, data from the Office for National Statistics showed Britain’s construction industry had rebounded at the fastest pace in a year for the month. Output leapt by 1.9% in a month to £13.8bn, the biggest monthly jump since January 2018. The ONS data pointed to a £135m surge in the value of private housebuilding projects to more than £3bn of work in November.

Ben Johnston, director of Houso, the off-market property app, said: “The market is moving in the right direction… but more emphasis is also needed on the government sorting out stamp duty in the budget so that it is at a more acceptable level to encourage downsizers and second steppers into the move which has been paused for the best bit of five years.”

Jeremy Leaf, a north London estate agent and a former RICS residential chairman, said: “The extent of any post-election ‘bounce’ will probably be determined not only by an ability to match buyer and seller expectations but early clarification of the UK’s future trading relationship with the EU.”

By Sajid Shaikh

Source: Yahoo Finance UK

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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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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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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