new mortgage guarantee scheme Low deposit mortgage UK mortgage approvals borrowing mortgage payment holidays mortgage payments FCA UK Mortgages approvals
Marketing No Comments

Most brokers think lending will recover to pre-COVID-19 levels within 9 months

Three quarters (77%) of brokers reckon mortgage lending will recover to pre COVID-19 levels within 9 months, while half (51%) believe it will happen within 6 months, research from Smart Money People has found.

Appointed representatives are more optimistic than directly authorised brokers, with 59% of ARs predicting that lending levels will recover within six months, compared to just 37% of DAs.

Michael Fotis, managing director of Smart Money People, said “Tentative steps are being taken to get the economy moving, and many lenders are talking loudly about their appetite to lend.

“That said, with job security likely to be a concern for many consumers, and predictions that house prices may decline by up to 13%, it’s really hard to see customer appetite for new mortgage lending returning until 2021 at the earliest.”

Brokers focused on the equity release market proved to be particularly sceptical of a full recovery, as just 19% felt lending levels will bounce back within six months.

BY RYAN BEMBRIDGE

Source: Property Wire

UK house prices Residential transaction House purchase lending Bank of Scotland mortgage lending growth mortgage payment holidays lenders
Marketing No Comments

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

Mortgage
Marketing No Comments

November year-on-year mortgage lending falls

The number of mortgages completed in November 2019 was down by around one tenth on the same time last year for both first-time buyers and home movers, figures from UK Finance show.

There were 30,620 new first-time buyer mortgages, down 10.5% from November 2018, and 30,750 home mover mortgages, a drop of 10.6%. This movement reflects particularly strong home-purchase activity in November 2018.

The value of first-time buyer mortgages was £5,271 million while home mover lending stood at £7,012 million.

Remortgaging

Remortgaging with additional borrowing in November 2019 rose by 5.7% year-on-year to 18,610 cases with the average additional amount borrowed being £51,470.

There were 18,470 new pound-for-pound remortgages (with no additional borrowing), which is down 12.4% from November 2018.

Buy-to-let

Buy-to-let home purchase loans fell in November 2019 to 6,300, which was 4.5% fewer than the same time last year. Remortgaging in the buy-to-let sector was also down, by 5.1% to 15,000 cases.

Comment

Rob Barnard, director of intermediaries at Masthaven, said: “These are mixed figures from UK Finance, however the mortgage market was resilient in 2019, particularly for first time buyers. This slight dip in completions could be a reflection of pre-election jitters. As certainty starts to build around the country, we should see a bounce bank in figures.

“However, the industry needs to ensure they are working to support the market. We need to capitalise on growing positive consumer sentiment and continue to offer products which suit modern lifestyles.

“As we move into 2020, we need to ensure later life and self-employed borrowers also benefit from increasingly flexible and innovative products and rates and we don’t leave any borrower groups locked out of the market”.

Nick Chadbourne, CEO of conveyancing solutions provider LMS, commented: “The continuation of low interest rates and competitive products from lenders ensured 2019 ended with a stable remortgage market.

“LMS data shows the gap between purchases of 5-year fixed rate products and 2-year fixed rate products has been closing steadily in recent months as borrowers take advantage of lower rates in place of longer-term certainty. It will be interesting to see if the balance will shifts one way or another moving into Q1 2020.

“All eyes are on the upcoming base rate decision. It will be interesting to see how lenders and borrowers react if there is a cut, as has been hinted at by prominent policy makers, given that it has been a while since rates last fell.”

By Joanne Atkin

Source: Mortgage Finance Gazette

Mortgage
Marketing No Comments

Mortgage price war to continue throughout 2020

The so-called mortgage price war that saw lender profits tumble and some banks pull the plug on mortgage lending in the past year is set to continue throughout 2020, brokers have warned.

Luke Somerset, chief commercial officer at broker firm John Charcol, said the sustained pressure on mortgage pricing was “likely to continue into 2020 and beyond”.

Over the past few years a competitive mortgage space has seen lenders cut rates in a ‘race to the bottom’. The average mortgage rate for a 10-year fixed mortgage stood at a record low of 2.76 per cent as at the end of November.

The average two-year fixed has sat below 2 per cent for those with a 40 per cent deposit over the past year while the rates of five-year fixes have also been declining steadily throughout the year.

Mr Somerset said: “Most of the significant news in mortgages in 2019 has related not to economic or political uncertainty, but the ongoing pressure on margins for lenders.

“Some big names have been forced to throw in the towel in 2019 with the likes of Tesco Bank withdrawing their mortgage range. This pressure is likely to continue into 2020 and beyond.”

Tesco pulled the plug on its mortgage lending arm in May, citing challenging market conditions and “limited profitable growth opportunities” as the key reasons.

Looking forward, Mr Somerset said it was “widely assumed” that the money markets had already priced in the impact of Brexit so it was unlikely anything “overly exciting” would happen to swap rates — the rates at which the money markets lend among themselves and to lenders which partly underpin the rates at which consumers can borrow.

He also noted the Bank of England had headroom in terms of the base rate, should the economy need a boost.

Mr Somerset said this interest rate scenario, combined with the fact lenders were sitting on “plenty of capital”, meant lending rates were unlikely to increase beyond a few basis points. He added: “If anything, we may see a few reductions in rates.”

Retail banks are flush with cash due to a shake up of regulation which came into effect on January 1, 2019. The new Bank of England rules created a firewall between the banks’ investment banking operations and their lending arms to ensure they were still able to lend and consumer money was safe even if a shock hit the banking sector.

With the ring-fence in place, funds which formerly could have been used to back riskier investments are now trapped in the retail environment and being diverted to the mortgage market, which has amplified the price war.

This scenario was not likely to change in 2020, according to Mr Somerset.

By Imogen Tew

Source: FT Adviser

stamp duty holiday Mortgage borrowing
Marketing No Comments

New research sheds light on mortgage cashback

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

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

There were four top priorities:

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

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

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

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

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

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

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

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

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

By Joanne Atkin

Source: Mortgage Finance Gazette

Marketing No Comments

U.K. Mortgage Approvals Jump to Highest in More Than Two Years

Demand for mortgages jumped last month to the highest since early 2017, according to data published Monday.

Loans for house purchases rose almost 11% from a year earlier to a seasonally adjusted 43,342, lobby group UK Finance said. The report covers seven high street banks representing around 60% of total mortgage lending, data on which are due to be published by the Bank of England on Aug. 30.

Meanwhile, credit card spending was 8.2% higher than it July 2018, while borrowing grew by 3.8% in the year. Spending hit a record 12 billion pounds in the month, while repayments reached a record. UK Finance said this shows that consumers are “managing their finances effectively overall.”

By David Goodman

Source: Bloomberg

Marketing No Comments

Mortgage lending down 4%

Gross mortgage lending in the UK fell by 4 per cent year-on-year in June, latest data has shown.

Figures from UK Finance, out today (July 24), showed that £21.9bn of lending across the residential mortgage market took place in June — 4 per cent less than in the same month last year.

High-street banks performed better than the rest of the market, according to the results, as gross mortgage lending from the big lenders only fell 1.1 per cent.

Mortgage approvals for house purchases increased by 2.9 per cent year-on-year as 48,539 consumers were approved in June.

This marked a slight drop from the 49,683 approvals in May but figures were still above average for the year.

Mortgage approvals — where a consumer is told they are eligible for a mortgage but is yet to actually borrow the money — are typically an indicator of how the future mortgage market will fare as these consumers are likely to go on to borrow the funds in the upcoming months.

Approvals for remortgages dropped slightly, by 1.4 per cent, to 29,415. Consumers remortgaging have bolstered the market in recent years and the number of remortgages is predicted to reach its peak later this year.

Steve Seal, director of sales and marketing at Bluestone Mortgages, said today’s figures didn’t show any “major jump” but that government schemes and attractive remortgage deals were continuing to appeal to borrowers.

Gareth Lewis, commercial director of property lender MT Finance, said the high street banks’ uplift in home purchase approvals was positive but could be down to the more attractive deals lenders were pushing.

He added: “Deals are being done. A colleague recently sold his house in the north of England in two days and this wasn’t because it was priced too cheaply. 

“There are people who are willing to get on and buy when an opportunity presents itself.”

Mr Lewis also thought the new prime minister could look at tax and stamp duty to help the property market, noting there were “measures afoot” to help stimulate property sales.

Boris Johnson was announced as leader of the Conservative Party yesterday (July 23) and there have been reports that he would be open to reforming stamp duty.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Encouragingly, the number of mortgages for home purchase rose in June compared with the same month last year, despite all the continued uncertainty over Brexit. 

“Hopefully, the installation of a new prime minister at number 10 will affect positive change for the wider economy and housing market, although it is still very early days.”

Mr Harris added that swap rates continued to fall, with a number of lenders, including Nationwide, NatWest and Accord, cutting some mortgage rates in the past week. 

He thought this downward pressure on pricing was likely to continue as lenders competed for business.

By Imogen Tew

Source: FT Adviser

Second charge Brexit
Marketing No Comments

More brokers searching for adverse second charge lenders

Second charge criteria searches on Knowledge Bank for people with debt issues accounted for four out of every five for the first time last month.

Knowledge Bank has the largest database of mortgage lending criteria held anywhere in the UK. Its criteria activity tracker found brokers searched for lenders who would allow debt or income issues, unsatisfied county court judgements, ongoing debt management plans, adverse credit repair or borrowers on benefits with no earned income.

Nicola Firth, chief executive of Knowledge Bank said: “Once again the criteria index allows us to get ahead of the market and understand the cases that brokers are actually trying to place rather than just those that make it through the lending net.`

“An increase in the number and complexity of products can be seen in each and every lending sector and so the challenge for brokers to find the right home for their clients’ loan becomes more and more onerous. With new lenders entering the market and existing lenders expanding their product options.

“We also constantly hear from brokers that criteria searching, in addition to helping them save time in placing cases, vitally enables them to evidence and document their process should their advice be questioned at any time in the future.

“Borrowers and regulators alike simply aren’t concerned how difficult it is to keep abreast of all available product options, just that it is done.”

The top search for residential was maximum age at end of term, followed by self-employed, one-years accounts while the top search for equity release was property with an annex, outbuildings, land or acreage, followed by freehold flats.

The main focus for brokers researching the buy-to-let sector in February was on finding lenders who would lend to first time landlords.

This criteria search has placed in the top five for the past six months and so the desire for borrowers to secure their first buy to let could, and should rightly, be classified as a trend rather than a passing fad

The top search for self-build was conversion, regulated bridging for bridging, applications paid in a foreign currency for overseas and maximum LTV for commercial.

By Michael Lloyd

Source: Mortgage Introducer

Marketing No Comments

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

Marketing No Comments

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