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The rise of self-build lending

Colin Field, CEO of Saffron Building Society, takes a closer look at the intricacies of self-build mortgage lending and why lenders and brokers should be involved

Last year we saw an increase in the number of self-build enquiries at Saffron Building Society.

For all of us in the industry, I believe this is going to be a growing segment over the coming years but the application process can be difficult if you aren’t prepared.

I wanted to share some of our experience to help brokers manage it more efficiently to unlock this growing opportunity.

Why is self-build booming?
An Ipsos MORI poll suggested that one in seven Britons expect to consider building their own home, which equates to around seven million people.

The 2017 Home Owners Survey reported that the quality of housing was also a contributory factor. 57% of adults considered it to be a problem, up from 52% the year before.

In addition, new builds are not popular, with almost twice as many people preferring an older home (49%) to a new build (19%). Obviously, it would be wrong to categorise all new builds in this way but it’s possible to see the trends.

The rise of new entrants
In financial services, we’re all accustomed to hearing about new fintech companies shaking up the market.

The construction industry is experiencing a similar revolution.

In May 2018, City AM reported on a company which is developing a new technique to solve construction problems. The founders believe that three problems need to be addressed in the current UK housing market – affordability, sustainability and quality.

Anyone able to overcome all three will be well positioned to thrive.

The company manufactures parts off site, then delivers and assembles them in a location of the buyer’s choosing.

The entrepreneurs believe this is the first time that modular housing has been supplied to a higher standard than the average new build, but at a lower price. This is achieved through the use of new materials, specifically ‘cross-laminated timber’ or CLT.

CLT is increasingly being used in the UK housing sector for its low environmental impact and versatility. And it’s particularly useful for modular or custom housing because it’s easy to modify.

Common problems
If you are unfamiliar with the intricacies and nuances of self-build, then it could pay to invest some time to learn more about it.

At Saffron Building Society our underwriters have years of experience assessing complex applications, so they see the common problems and errors in self and custom-build applications. Here are some of the most common problems:

• Planning consent – all applications must be accompanied by full planning consent. If consent is unavailable, it will be impossible to proceed with the application. Planning consent can take approximately 12 weeks, sometimes longer depending on the type of construction. Without it, a mortgage valuer can’t assess the value of the property so it is one of the essential aspects of the application.

• Build costs – In some instances it is clear that applicants have not fully considered the costs of the build, and detailed costings are always required when applying for a mortgage. A lack of detail about costs will set the alarm bells ringing. A fixed price contract with the builders always provides more certainty, and without one more information will be required.

• Affordability – a common but surprising mistake is that people forget they will need somewhere to live while their house is being built. Rental costs affect affordability and have to be included. Additionally, people need a contingency plan with savings to fall back on in the event of unexpected events. No matter how well a project is estimated, there may be unknown costs that crop up along the way.

• Warranties – a warranty provides the guarantee that future problems will be fixed by those responsible for the build. However, construction warranties come in many different shapes and sizes. Before submitting an application it’s important to check the warranty the applicant has in place and make sure that it’s acceptable to the mortgage provider who will usually have a list of acceptable warranties. It’s also important to be aware that people are increasingly using architect’s certificates, but this is a little riskier and will need further investigation by the mortgage provider.

• Stage payments – can often cause applicants a problem as they find it difficult to provide a definitive time they want the money. We try to work as flexibly as possible with borrowers as we have experience dealing with the many different variables which occur during a house build. However, to ensure a swift response, we need to understand the applicant’s needs in respect of how they require to draw down the stage payments.

2019 and beyond
There is a growing body of traction to suggest that self and custom-built homes will assume an increasing proportion of the mortgage market.

Specialism and expertise in this area will mean you can be active and gain experience in a growing segment of the market.

Source: Mortgage Finance Gazette

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UK mortgage lending slows in December

British banks approved fewer mortgages last month than in November and the value of lending for home purchases rose by the smallest amount since 2016, an industry survey showed on Friday.

Seasonally-adjusted data from the UK Finance industry body showed banks approved 38,779 mortgages last month. While up more than 6 percent on a year ago, this was down from 39,205 in November.

The value of net mortgage lending increased by 1.235 billion pounds, the smallest rise since August 2016.

The figures largely add to signs of a slowdown in Britain’s housing market ahead of Brexit.

Last week the Royal Institution of Chartered Surveyors said its members had the most negative outlook for house sales over the coming three months since its records began in 1999.

UK Finance also said it saw signs that businesses were building up cash reserves, particularly in the construction and retail sectors, in preparation for uncertain trading conditions.

With little time left until Britain is due to leave the EU on March 29, there is no agreement in London on how it should exit the world’s biggest trading bloc, and a growing chance of a ‘no-deal’ exit with no provision to soften the economic shock.

Source: Investing

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November sees rise in number of first-time buyers

Mortgage lending ticked upwards in November 2018 with first-time buyers showing stronger growth than home movers but buy-to-let purchase continues to fall, figures from UK Finance show.

There were 36,200 new first-time buyer mortgages in November, which is 5.8% more than in the same month a year earlier. They took out £6 billion in the month – a rise of 9.1% year-on-year.

The number of new home mover mortgages was also 36,200, but this was just 1.1% more than in the same month a year earlier.  New lending totalled £7.8 billion – 4% more year-on-year.

The average first-time buyer is 30 and has a gross household income of £42,000 compared to the average home mover who is 39 with a gross household income of £55,000.

There were 39,600 new homeowner remortgages completed in the month, some 1.3% more than in the same month a year earlier.  The £6.8 billion of remortgaging was the same year-on-year.

Buy-to-let

A total of 6,100 new buy-to-let home purchase mortgages were completed in November, some 9% fewer than in the same month a year earlier.  By value this was £0.8 billion of lending, down 11.1% year-on-year.

Buy-to-let remortgaging fared better with 15,000 completions in the month, 9.5% more than in the November 2017.  By value this was £2.4 billion of lending, representing an annual increase of 9.1%.

Comment

Jackie Bennett, director of mortgages at UK Finance, said: “A mixture of competitive deals and schemes including Help to Buy saw even more first-time buyers get a foot on the housing ladder during November.

“Meanwhile, homeowner remortgaging activity has steadied, after reaching its highest level in a decade the previous month as a large number of fixed-rate deals came to an end.

“In the buy-to-let market new home purchases remain subdued, while remortgaging continues to grow as landlords lock into attractive rates.”

Source: Mortgage Finance Gazette

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How are emerging technologies changing the mortgage landscape?

Mortgage lending is expected to increase slightly in 2019 and the Bank of England may raise the base rate which means that competition on rates between lenders will continue. But there are other ways for borrowers to differentiate between lenders – apart from on price – such as customer experience, speed of service, an efficient service and making the customer journey easier.

Teleperformance, which provides digital integrated business services, has carried out some research and found that it takes 18 to 40 to days to go from mortgage application to final mortgage offer with the bulk of that being taken up by the time it takes to carry out a valuation.

The mortgage application requires original copies of utilities bills and bank statements but that slows down the process. Some lenders now accept digital versions, which is good because 69% of consumers receive paperless bank statements, and that goes up to 75% amongst 18 to 24 year olds, according to a research by ID verification software firm GBG.

Can identity data be used to speed up the mortgage application process and make it more accurate and less susceptible to fraud? Is it FCA rules or lender procedures that dictate borrowers having to produce hard documents?

There is continued growth in the use of artificial intelligence and Robotic Process Automation (RPA), which relies on data to perform repetitive and automated tasks, thus eliminating human error and freeing up humans to do other things.

Teleperformance has found that within the mortgage market, the five key metrics that influence customer decisions are brand, price, accessibility, customer experience and speed of service. The big lenders are strong in the first three but lose out in the customer journey and responsiveness offered by small lenders and fintech players.

Digitisation covers a host of other applications such as digital signatures; and does open banking, now a year old, hold the most potential for change in the mortgage market?

How far down the line is the mortgage industry with accepting electronic documentation instead of customers having to produce paper copies?

Kris Brewster, head of products, proposition & corporate communications, Skipton Building Society: We currently ask for payment documents and will accept scans but we are moving away from that and towards getting as much automation as possible into our back office processes. We use a combination of technology – automated valuations, income verification, access to data through open banking. All parts of the mortgage chain are starting to link up, even into conveyancing and Land Registry, so for us all the information is there, it’s about linking that up. I expect everyone across the industry is working on exactly the same thing.

Are consumers demanding the move from the conventional paper-based application to a more digitised process? People are used to home shopping, ordering goods online with delivery the next day. Is that shaping the way to build a lending process?

Matt Ward, head of mortgage service delivery, Santander: Very much so. I think there’s a consumer expectation that they should be able to communicate with their bank in the same way they would in any other area of their life. There’s a drive from consumers and intermediaries towards electronically submitting documentation and the challenge for the industry is to ensure we’re keeping this secure.

How much impact does regulation have on digital documentation?

Paul Clampin, chief lending officer, Landbay: The challenge is to work within the regulatory framework particularly anti-money laundering. The test for lenders is proving that the customer is who they say they are and that the security is adequate. Landbay is a fintech lender so we’re able to take applications to completion in 18 days but that’s where we have been provided with the information very early on in the process.

We’ve been able to automate large parts of the buy-to-let market because 97% is still intermediary based and they tend to do things in a formulaic process. The biggest change to the buy-to-let market and lenders generally will be the development of a single source of application data but that has not been developed fully.

How can sourcing systems and APIs move the application process on?

Paul Clampin: If all brokers use the same sourcing system for quotes and then send the application to lenders, they can immediately respond with an indicative quote on price and what information they’ll need. I think we’re a long way away from that, but something like that was piloted in 2003. I think that’s more likely to happen in the residential side or maybe the complex prime side of the market than it is for buy-to-let which has more complexities.

Andrew Asaam, director of mortgages, Virgin Money: I think that’s going to happen in 2019 and it’s going to be a game changer. It’s not for all intermediaries but scale intermediaries will get operational benefits from having a digitalised process.

Kris Brewster: We’re working on direct submission via APIs with various sourcing systems. I would expect that to be in place soon and that will be the long-term future for submission using data, cutting out the inefficiency, cutting out the rekeying and the manual work that broker admin teams have to do. There would be a strong push for that and it will take different lenders, different times to join that party but I suspect in the long run everyone will have to play in that way.

Andrew Asaam: I think we’re all digitising our processes, we’re just on different parts of the journey depending on funding and legacy systems. Digitisation of the ultimate customer journey involves signatures, documents, appointments, omni-channel with data consistency, APIs and all this will happen over the next 12 months.

Kris Brewster: One dilemma is around building systems yourself or using a partner. Thinking about the approach to APIs, it’s about getting that balance between what you own and what is with your partner. It is quite a change for a lot of lenders if we’re used to controlling all of that process ourselves.

Paul Clampin: It’s also about legacy systems. How quickly you want to move and your ability to move which determines whether you use a third party or do it yourself.

Alex Maddox, product & capital markets director, Kensington Mortgages: Risk is a key issue with third parties. How do we deal with prequalification from price comparison websites? If a customer has been prequalified with a credit check, and it’s not the credit reference agency we use internally, how do we deal with that, do we check it again? If it gets sent out to multiple lenders does everyone do their own credit check?

How advanced are lenders in respect of Robotic Process Automation (RPA) and artificial intelligence?

Matt Ward: I think quite a lot of lenders use RPAs particularly in larger organisations. We certainly use RPAs where we believe we’ve got repetitive processes, particularly those of a legacy nature where you’re moving data from one system to another. It’s a highly accurate manner in which to manage this.

Mike Sloman, SVP business development, Teleperformance: It’s quite ironic that one of the beauties of RPA is that it works best with legacy systems. When you have multiple legacy stable systems that are easy to automate it actually takes away a lot of the business case for replacing systems or putting new platforms in.

Kris Brewster: Our robotics at Skipton is in the pilot phase and we expect to be using that properly across real life processes in early 2019.

Puneet Taneja, EVP operations, BFSI at Teleperformance: The progress made on the use of robotics on the servicing side is much higher than in originations. If you look at appointment bookings today in most branches you still have a long, drawn-out process and we see opportunities for robotics to take a much more active role.

Alex Maddox: We used robotics in servicing first but we’ve now rolled it out to underwriting and even integrating with external parties to pull in data as an alternative to APIs. So it can be used everywhere but I think servicing is a good starting point, it’s a lower focus from a risk point of view.

Can RPAs help with underwriting?

Paul Clampin: I think it works more in residential because data sets are more established and more predictable than other markets such as complex buy-to-let, although standard buy-to-let might be easier.

Alex Maddox: I think it’s a journey. We’ve all been using rules-based engines to speed things up but that’s the first step on the customer journey. You need certain information to feed into those rules so how do you pull that in through robotics or APIs?

As we are a specialist lender, there will always be a lot of human interaction in every single case because our customers have some kind of complexity to their situation and it’s complexity that’s difficult to automate. But the complex part of the market is either in the top end of the buy-to-let space or is a relatively small percentage of the owner-occupied market. So there’s a lot of standard business out there that could be automated very efficiently and provide a great customer experience.

Andrew Assam: There are two challenges here. It might prove payment of rental amount but it does not factor in SVR plus 3% for stress testing requirements and the deposit raising is probably an even bigger constraint. So I think taking rental payments into account helps but I’m not sure it’s enough.

Matt Ward: Rental information will show consumers’ ability to repay, or commitment to repay, so clearly you will improve your view of them from a risk perspective.

Alex Maddox: It’s similar to the mortgage prisoner analysis where someone has exhibited an ability to pay off a certain amount but is that suitable evidence that they will be able to pay the same amount going forward? On all of our models historical payment is one of the best predictors of future payment ability, but unfortunately it doesn’t tick the regulatory box, because of the 3% interest rate stress test.

What future does robo advice have?

Kris Brewster: I would expect to see more development of robo advice or guided execution only solutions for customers particularly as remortgaging increases. There is technology to help support the advice process and there are cases that don’t necessarily need all the skill of an adviser.

Matt Ward: It’s an interesting challenge because we’ve been finding there are lots of digitally savvy customers that are capable of using online resources. If they wish to interact in this way, that’s absolutely fine, but those that are ’digitally savvy’ may not be ’mortgage savvy’. How do we know when it may be best to just put that customer straight into an advice process to make sure they have help from the outset? This is a market that everybody’s going to start to explore I would imagine.

Alex Maddox: One of the areas where AI is being used is chatbots – and that’s across finance not just in mortgages with different levels of success.

Matt Ward: It could be hybrid solutions that customers will be looking for in the future – a live chat, then a video conference with an adviser while they’re filling in their forms so they can talk things through.

Paul Clampin: The challenge with robo advice is ensuring it’s fit and proper for each individual circumstance, that’s very complicated. I don’t imagine lenders are going to use robo advice, their professional indemnity insurance would be quite interesting too.

Andrew Asaam: The regulator does want robo advice and there is a lender actively talking to the FCA about it and could be ready to launch in around three to six months. We’re being disrupted in a huge way with aggregators, fintechs, digitisation of unified services and in three to five years the industry will look very different.

How can customer retention be improved?

Kris Brewster: There’s potential to support customers post mortgage completion apart from an annual statement. We know people are not moving as often, they are home improving and borrowing more, particularly as they get into later life. I think there’s scope to improve the customer experience, and this is a new area that could be better developed.

Matt Ward: I agree. We could be more visible to the customer so they have an understanding of how they can interact with us, for example, a notification of the next deals that are available for them or reminders that they can overpay.

Alex Maddox: There’s a bunch of fintechs out there who are trying to engage with customers during the mortgage life so if lenders don’t start to engage, someone else will and you will lose your customer.

Kris Brewster: The challenge of retention is huge and I think one of the other changes is that aggregators will enter the mortgage market over the next 12 to 18 months acting somewhat like brokers but also with a lot of technology. They could do to the mortgage market what they have done to the home insurance market and disrupt it.

When interest rates start to go up some people may move into arrears. Can AI help to predict which borrowers are going to be affected and who might struggle in the future?

Alex Maddox: Our outcomes, which are based on machine learning, are the same ones that we use to predict arrears. They’re the same ones that we use to work out what headcount we need to cover arrears, based on the level of arrears that we expect. So it’s a single application that runs across the whole business.

What’s more interesting with digitalisation is identifying vulnerable customers. You have to train your staff to identify vulnerable customers early and if you can overlay technology on top of that then we should all do that.

If we can use open banking to help us really understand the customer’s true situation then we should be able to put together a better forbearance strategy working with the customer to help them out in that situation. But customers will have to be ready to open up their bank accounts to us and let us work with them or let their tax adviser work with them. The more information that is shared between the different parties the better and more successful the forbearance strategy will be.

Other points

It was also noted that speech analytics can detect people who have rung more than once to ask trigger questions such as what would be the impact on their mortgage if the rate goes up by 0.5%. You can build an algorithm that pulls up a list of people asking similar questions and red flag them.

There are systems now which alert the borrower to a better mortgage deal, even though they’re not specifically looking. It was pointed out that the deal would have to be appropriate to the individual’s circumstances which could be a challenge.

Post offer process

There was a discussion around the post offer process which can be slow with customer feedback showing frustration around valuations and particularly conveyancing. There are technology firms working to improve the visibility of the process and show the customer where they are in the journey. All well and good as far as communication is concerned but that doesn’t help the process move on if there is a weak link. If you are in a chain of five properties and one takes three months to complete, the fact that somebody else can do it in a week is irrelevant because you’ll still be waiting.

ID verification

A customer has to provide ID documentation to the estate agent, intermediary, lender and conveyancer. Could there be one ID hub instead that each part of the process can access? Regulation demands that each supplier is satisfied that their ID verification is robust but some lenders will accept the broker’s ID checks. It boils down to reliance on third parties and is that a regulatory issue or a risk appetite issue?

It was suggested that there could be some kind of block chain or ledger type technology that can allow information to be passed along with the case as it transfers from the first interaction right through to completion. We are quite a long way from that but it could be an interesting solution.

Risk based pricing

There was a discussion on the move from big data to small data. Organisations may be rich with data, but do they actually know their customers? If you have the right data about people this can result in risk based personalised pricing but we’re quite a way from that at the moment. Retention is the obvious place where you could start using your data to offer bespoke pricing based on risk and capital usage. It’s harder in the new business market because there’s a more competitive force.

So to conclude, technology is evolving all the time and 2019 looks like a year where even more technological development will enhance the mortgage and house buying process. From mortgage application through to back office systems and processes as well as post mortgage completion, there is a great deal of work going on behind the scenes.

Source: Mortgage Finance Gazette

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Buyers and banks ignoring Brexit concerns as mortgage lending hits highest level since January

Mortgage approvals for house purchase have hit their highest levels since January.

Banks approved 67,086 home loans in October, up 2% on a monthly basis, according to Bank of England data on mortgage lending.

Remortgage approvals, which had previously dominated the market, were flat at 49,339.

It backs up estimates by banking trade body UK Finance earlier this week that mortgage lending for house purchase had hit a three-month high.

Commenting on the data, Kevin Roberts, director at the Legal and General Mortgage Club, said: “There’s no doubt that Brexit and the ongoing political uncertainty has made some buyers and potential sellers act with caution, despite the current low interest rate environment.

“However, with its growing choice and flexibility, the mortgage market continues to entice borrowers looking for competitive deals.”

Source: Property Industry Eye

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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

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Mortgage lending policies ‘creating housing blacklist for tenants on benefits’

MPs have raised concerns that a “housing blacklist” is effectively being created due to restrictions on mortgage lending to landlords whose tenants receive benefits.

The Work and Pensions Committee said it is “deeply concerned” about the extent to which mortgage providers are preventing landlords from renting to benefit claimants – particularly given the “desperate shortage” of affordable housing and the large numbers of claimants now dependant on the private rented sector.

Committee chair Frank Field said allowing banks to operate a “no DSS” policy “is a return to the wicked old days of housing discrimination, with claimants effectively blacklisted for housing”.

It has published correspondence with RBS chief executive Ross McEwan, following concerns about restrictions on mortgage lending to landlords whose tenants receive housing benefit and Universal Credit.

The committee said NatWest, which is part of RBS, had previously come under fire over the case of a landlord refused a re-mortgage because the property was being rented to a tenant in receipt of housing benefit.

It said there are 4.2 million people in receipt of housing benefit in the UK – and research suggests several lenders have this kind of prohibition on lending.

In a letter published by the committee addressing NatWest’s buy-to-let mortgage policy, Mr McEwan said he was “extremely disappointed” with the way the customer case was handled, saying it “did not reflect the values of our organisation”.

Mr McEwan, who reviewed the case personally, said he had identified several areas for improvement, which are now being addressed.

The letter also stated: “In line with a number of other lenders in the buy-to-let market, our mortgage policy for landlords with smaller property portfolios (ie fewer than 10 properties) includes a restriction on letting to tenants in receipt of housing benefit.

“This reflects evidence that rental arrears are much greater in this segment of the market and we are satisfied that this restriction does not contravene equality legislation.”

NatWest has agreed to inform the committee of the outcome of its policy review.

The committee said it has been inquiring into the impact of Universal Credit since January 2017, when it first started to learn of the problems of rent arrears and destitution associated with rollout of the controversial new benefit.

Mr Field said: “The Government claims its welfare reforms are intended to drive employment, but allowing banks to operate a ‘no DSS’ policy is a return to the wicked old days of housing discrimination, with claimants effectively blacklisted for housing and at risk of being senselessly evicted for no greater crime than receiving housing benefit.

“NatWest is now taking a look at its policy, and other mortgage lenders will no doubt follow suit. If the change we need to protect people is not forthcoming voluntarily, we may need to look to regulation.”

A spokesman for trade association UK Finance said: “The majority of lenders do not place restrictions on landlords letting to benefit claimants, with each lender’s policy varying according to their commercial business model.

“Any landlord wanting to let to benefit claimants should be able to find a lender that will allow this.

“We would always encourage individuals to speak to their lender if they have any concerns and research the market to find the best possible deal for their needs.”

Source: Yahoo Finance UK

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Haart Says Government Must Increase Buy To Let Support

The government needs to increase the support it extends to buy to let investors, according to Haart estate agents.

The government needs to begin supporting investors or it will see significant numbers of landlords exiting the buy to let market says Haart. This will lead to a sharp decline in rental property listings.

The call for further support comes amidst the government consultation for longer tenancies. Without greater incentives for buy to let landlords, many will not be prepared to offer longer tenancies. They will then leave the market. This will contribute towards the already-exiting supply and demand imbalance in the private rental sector that is beginning to push rental prices higher, adding more pressure on tenants.

Prospects for the sector without further incentives are looking worrying. The latest data from UK Finance found that gross mortgage lending rose by 7.6 per cent to £24.6 billion in July 2018 year on year. This was ahead of this month’s base rate rise.

However, activity in the buy to let sector did not grow. This is likely due to increasingly punitive tax measures levied by the government, such as reducing mortgage interest relief to the basic rate of income tax and adding a 3 per cent stamp duty surcharge to the purchase of additional homes.

12 per cent fewer landlords are purchasing properties in comparison to the same time last year.

CEO of Haart estate agents, Paul Smith, commented: ‘Mortgage lending jumped a huge 8 per cent on the year in July as existing homeowners sought to seal themselves into a lower rate ahead of the Bank of England’s interest rate hike. The buy to let sector is a fundamental part of the UK property market, and with fewer landlords, we are seeing rents rise. The government must stop penalising those who are willing to invest in the rental market and stop its needless crackdown on the sector.’

Source: Residential Landlord

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Mortgage lending drops to ‘disappointing level’ as buyer interest falls away

Nationwide this morning reported the biggest monthly drop in house prices since July 2012.

The lender said that the average house price is currently standing at £214,745 this month, down 0.5%  from £217,010 in July.

The fall brought annual house price inflation down to 2%, and Nationwide said it expects house prices to finish this year 1% up.

Meanwhile, mortgage lending fell to £3.2bn in July, the lowest figure for 15 months, according to the Bank of England.

Mortgage approvals for house purchase dipped to 65,000, while the number of approvals for remortgages fell 5.5% to 45,000.

Estate agent Jeremy Leaf said the figures were disappointing “in that they reflect a period when we would have expected a pick-up in the market over the spring buying season”.

John Eastgate, sales and marketing director at OneSavings Bank, said: “Buyer activity remains pretty depressed as the market comes to terms with economic uncertainty on top of existing obstacles of a lack of supply and increasing affordability challenges.”

Separately, NAEA Propertymark said that in July the number of properties available per estate agency branch rose for the third consecutive month, from an average in 33 in April, to 37 in May, to 39 in June, and to 41 last month.

Measured year on year, this is 17% up on July last year, when agent branches had an average of 35 properties.

While supply rose, demand shrank for a second month running, to 303 applicants per branch. However, the NAEA said this was entirely in line with seasonal trends.

Source: Property Industry Eye

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House purchase approvals slide from five-month high

The value of mortgage lending rose in July but fewer home purchase loans were approved, data suggests. It comes after mortgage approvals for house purchase hit a five-month high in June.

Lending data from banking trade body UK Finance shows that the number of mortgage approvals for house purchase fell 0.6% annually to 43,976 during the month, although the number of remortgages rose 2.8% to 28,294.

Actual mortgage lending values were up 7.6% annually to £24.6 bn.

Commenting on the figures, Paul Smith, chief executive of haart estate agents, said branch activity is being driven by first-time buyers and called for more support for landlords.

He said: “Conditions are still ripe for further growth in the lending market this year.

“The UK is currently experiencing the highest level of employment in decades, mortgages remain readily available, and rates are still historically low, despite the recent base rate rise.

“On the ground, activity is looking positive – our branches have seen a 10% increase in transactions on the year. This surge of activity is largely being driven by first-time buyers who are continuing to take advantage of their Stamp Duty cut.

“However, landlords are still feeling the pinch with 12% fewer landlords buying property than the same time last year.

“The buy-to-let sector is a fundamental part of the UK property market, and with fewer landlords, we are seeing rents rise. The Government must stop penalising those who are willing to invest in the rental market and stop its needless crackdown on the sector.”

Source: Property Industry Eye