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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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Struggling to get a mortgage? Try a broker… or a small lender

It’s mayhem in the mortgage market at the moment due to a paperwork backlog at banks and pent-up demand from the lockdown.

Lenders are making changes to their home loan deals with little or no notice to limit the amount of business they take on.

So that cheap rate you were eyeing up could quite easily be gone tomorrow. Or the terms and conditions may change suddenly, meaning you no longer qualify for a loan you thought had been secured.

Here are four other places to turn if you are caught up in the chaos…

SMALLER LENDERS

Lee Hockins, from Summit Wealth financial advisers, says: ‘It’s virtually impossible at the moment to get a mortgage at 95 per cent loan to value and there are only a small number of lenders offering 90 per cent mortgages – and none of the big ones.’

Lloyds, NatWest, Barclays, Santander, TSB and most recently HSBC have all pulled out of the market for mortgages with a deposit of 10 per cent or less, hammering first-time buyers.

The good news is that smaller regional building societies may be able to help.

Many still assess applications manually, unlike big banks which often use automated underwriting technology which can result in a computer-generated rejection.

Having your application assessed by an individual means your specific circumstances can be taken into account. Try the Buckinghamshire, the Penrith and Stafford Railway.

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BANK OF MUM AND DAD

Popular mortgage deals that allow parents to help their offspring on to the ladder are being cut back too.

But the Bank of Mum and Dad isn’t entirely closed.

After Lloyds shut its Lend a Hand mortgage to new applicants, the main mortgage designed for parental help is Barclays’ Family Springboard deal.

This allows a family member or friend to put at least 10 per cent of the purchase price in a savings account with the bank in place of a deposit.

Ray Boulger, of mortgage brokerage John Charcol, says: ‘The Barclays Springboard mortgage is the best of the deals for people who are getting help. It’s really good value for first-time buyers with either a small or no deposit, who has someone who wants to help but also wants to keep control of their funds.’

Tipton & Coseley Building Society has launched a Family Assist mortgage offering up to 100 per cent loan-to-value mortgages for buyers, so long as a relative has a 20 per cent charge on their own property or puts 20 per cent of the amount borrowed into a savings account.

But some are limiting the amount of outside help allowed. Nationwide recently changed the criteria for gifted deposits, so borrowers who want a 90 per cent loan-to-value mortgage can only be given 25 per cent of the deposit, meaning they have to provide the rest themselves.

A BROKER ON YOUR SIDE

With banks launching and ditching mortgage deals on an almost daily basis, a broker can really prove their worth.

Not only do they often get tipped off in advance when a deal is about to be pulled, they are clued up on the specific criteria that each lender will look for in your mortgage application – and can stop you wasting time. Brokers will also have a good idea how stretched a bank’s mortgage department will be, helping you avoid disappointment when demand is high.

TRY A LIFETIME MORTGAGE

For the over-55s who are retired or approaching retirement, an alternative option is a so-called retirement interest-only mortgage. Boulger says: ‘With these deals, the eventual sale of the property can be used as the repayment strategy.

‘So lenders assess whether you can afford the loan on the cost of paying the interest only in retirement, as opposed to a repayment deal where you have to pay back some of the capital each month.

‘The downside is that if it’s a joint application, lenders have to decide whether, after one partner dies, the surviving partner would be able to support the mortgage from the remaining income.’

Lenders offering this type of mortgage include Nationwide, Leeds, Bath, Ipswich, Loughborough and Tipton building societies.

…OR LET THE CHAOS PLAY OUT

  • Mortgage rates are expected to remain at current levels for some time – but house prices may not.
  • Many experts believe that while prices are heading up at the moment, there could be a fall back when the stamp duty holiday ends in March next year.
  • Remember, if you are buying and selling at the same time, then a fall in the market is likely to impact both ends of the deal.
  • So you may be no worse off if you wait – and find it easier to borrow the amount you need for your next mortgage.

By Sarah Bridge, The Mail on Sunday

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Mortgage payment holidays have been a vital lifeline

Mortgage payment holidays have proved a vital lifeline for homeowners struggling financially due to the COVID-19 crisis, according to online mortgage broker Trussle.

However, following the Financial Conduct Authority’s (FCA) statement that mortgage payment holidays will not extend past 31 October, and further financial supports after that point will affect borrowers’ credit files, Trussle has urged homeowners to use caution with this support system.

Miles Robinson, head of mortgages at Trussle, said: “It’s clear that mortgage payment holidays have proved a vital lifeline for some homeowners who have suffered financially as a result of the coronavirus pandemic.

“It’s important to know that unlike before, if you need financial support from your lender after 31 October, it will be marked on your credit file.

“We’d urge homeowners to only utilise the mortgage payment holiday if it’s essential.”

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Robinson also highlighted that once a homeowner’s mortgage payment holiday reaches its end, their monthly payments will increase as a result of additional interest being added to the total mortgage balance.

Meanwhile some lenders offer other viable alternatives; this includes switching some of the loan amount to interest-only payments in the short-term.

Miles Robinson, head of mortgages at Trussle, said: “For existing homeowners, now could also be a good time to think about remortgaging.

“Our customers save £334 on average per month by remortgaging onto a fixed rate, so it is worth using a remortgage calculator to see if switching could save you money.

“Any aspiring or existing homeowners who are considering taking a mortgage payment holiday should seek professional advice as soon as possible to discuss their options.”

By Jake Carter

Source: Mortgage Introducer

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BoE: July mortgage borrowing up £0.3bn month-on-month

In July, households borrowed a net additional £2.7bn secured on their homes, according to the BoE Money and Credit report.

This was up on the £2.4bn in June, but below the average of £4.2bn in the six months to February 2020.

The increase reflected a slight increase in gross borrowing to £17.4bn in July, below the pre-COVID February level of £23.7bn and consistent with the recent weakness in mortgage approvals.

The number of mortgage approvals for house purchase continued recovering in July, reaching 66,300, up from 39,900 in June.

Approvals were 10% below the February level of 73,700, but more than seven times higher than the trough of 9,300 in May.

Approvals for remortgage were little changed compared to June, at 36,000; they remained 30% lower than in February.

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The effective rates on new and outstanding mortgages were little changed in July.

New mortgage rates were 1.73%, a decrease of 4 basis points on the month, while the interest rate on the stock of mortgage loans fell 1 basis point to 2.15% in July.

Hugh Wade-Jones, managing director of Enness Global Mortgages, said: “The latest rate of mortgage approvals is really quite astonishing given the dire position of the market just a few short months ago.

“There is no doubt that the huge surge of buyer demand seen once the market reopened has been seriously turbo-charged due to the stamp duty holiday announced shortly after, with the combination of both causing buyers to return to the market at mass.

“As a result, we’ve seen the number of people approved for a mortgage rebound from the depths of pandemic paralysis in May to hit almost the same levels as this time last year in just two months, with the current trajectory sure to return the market to pre-lockdown levels in no time.

“The rate of this return to form really shouldn’t be underestimated and these notably heightened levels of buyer demand should prove just the medicine for the UK property market, reversing any pandemic decline in house price growth seen during lockdown.”

Gareth Lewis, commercial director of MT Finance, said: “There are positive signs indicating plenty of consumer confidence out there as people are borrowing money.

“There are more ‘for sale’ and ‘sold’ signs springing up, and even tales of gazumping.

“August’s numbers will show even more of an uptick in transactions once the stamp duty holiday starts to filter through to the figures.

“While July’s numbers show an improvement on June, they would have been better still if transactions weren’t taking so long.

“Lenders still have staff furloughed or working from home, and it is taking them too long to process applications.

“This isn’t going to change for a while yet as they don’t have the capacity to bring everyone back to the office.

“With many surveyors only just coming back off furlough as well, this is having a negative impact on turnaround times.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “Mortgage approval numbers always provide a useful lead indicator of direction of travel for the property market in the coming months.

“Unfortunately, these figures relate to the period when we were emerging from lockdown but before the full benefit of the stamp duty holiday was being felt.

“Contact with mortgage brokers or lenders is not always the first thought of aspiring buyers.

“As a result, these approvals do not reflect the stronger upsurge we noticed across most property types and price ranges from the beginning of August.”

By Jessica Bird

Source: Mortgage Introducer

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Mortgage brokers urged to diversify in wake of Covid

Mortgage brokers have been urged to branch out into specialist lending as a way to diversify against falls in mortgage activity.

Encouraging brokers to “embrace” specialist lending, Rob Barnard, director of intermediaries at Masthaven, a specialist lender, said: “I think brokers now won’t just rely on mortgage business; they won’t just rely on product transfer business. Because they’ve had a period here right at the heart of the lockdown where there wasn’t a great deal of mortgage business about”.

Statistics from the Bank of England show approvals for purchase mortgages reached 40,000 in June, up from the record low of 9,300 in May, but still below a pre-Covid level in February of 73,700.

Mr Barnard added: “One area that we found that was rebounding quicker than any was bridging. And we found that brokers wanted to find out more about the bridging sector.”

He continued: “Make sure that you’re not just dependent on mortgage business, so if this ever happened again, you’ve got more strings to your bow”.

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Anthony Rose, director at LDNfinance, said his firm had seen a “large increase” in clients who required a bridge, or thought it might be their “only option”.

Jamie Lewis, managing director at Affinity Mortgages, which also offers advice on bridging loans, said his firm launched a specialist lending arm in 2018 after packagers and master brokers did not meet their expectations.

Mr Lewis said: “We noticed that we as a broker were being asked for more than mortgage broking and were merrily delivering these clients to a third party business that maybe had a different working ethic to ours where the client will always come first”.

Additionally, Masthaven’s Mr Barnard predicted a change in demand for specialist lenders. He said: “Lots of people’s financial circumstances have been radically affected by the crisis. Small business owners, the self-employed, people who’ve been furloughed or who have had to take a mortgage payment holiday may all now be prospective customers for specialist lenders”.

Carl Shave, director at Just Mortgage Brokers, agreed that in the current financial and economic climate, cases previously regarded as “vanilla” were no longer necessarily as straightforward.

Likewise, LDNfinance’s Mr Rose said that the financial implications of the coronavirus for certain clients had “highlighted the need to be able to look at the full range of options, ranging from the most vanilla high street solutions all the way to the most complex bridging or private bank mortgage”.

Clayton Shipton, managing director at CLS Money, also agreed with Mr Barnard, and warned that some clients may not look elsewhere if they were unable to find a mortgage through an adviser with limited specialist knowledge.

Mr Shipton added: “It shouldn’t come down to a lottery of picking the right broker – every broker should be educated in prime and specialist lenders”.

By Chloe Cheung

Source: FT Adviser

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Recovery: Mortgage market activity in July branded ‘astonishing’

Mortgage searches for loans of more than £500,000 increased in July but buy-to-let demand dropped off as the month ended.

That’s according to the latest data from mortgage technology provider Twenty7Tec which has described the market recovery seen in July as ‘astonishing’.

In its monthly report on supply and demand it revealed there were three times as many broker searches for purchase mortgages in July than in May.

The largest rise, it found, was in the £500,000 to £1 million region – an increase driven by the stamp duty savings buyers could make on these properties.

However, there was also an increase in first-time buyer queries, with searches rising from 13% in May to 19% in July. Searches were regularly hitting 10,000 per day and the top ten busiest days for first-time buyer mortgage searches this year were all in July.

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However, there was some concern over buy-to-let. Although searches for this sector were up by nearly 30% at the end of the month the seven-day rolling average fell to levels seen at the beginning of the month.

James Tucker, CEO of Twenty7Tec suggested this could be ‘blip’ following the prime ministers tightening of rules nationwide. But he said it would be interesting to watch what happens over the next few days as it could also be a pre-cursor to what we might expect over the coming months.

Product demand and supply

Product availability also dropped off slightly in July compared to June, despite the increasing demand.

At the maximum loan-to-value points of 70% and 75% Twenty7Tec noticed product volumes drop by 14% and 10% respectively.

Discussing the report in general, Tucker added: “July has been the busiest month of 2020 for mortgage searches.

“This is not a sentence that I was expecting to write less than a month ago. For our business, and indeed for our customers, the speed of the recovery of activity in the mortgage market has been truly astonishing.

“This is not a time to be complacent however – the positive momentum that we have all found both in business volumes and in the speed of technological change should not be lost.”

By Kate Saines

Source: Mortgage Finance Gazette

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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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BoE: New mortgage commitments up 6.1% in Q1

The first quarter of 2020 saw a 6.1% year-on-year increase in the value of new mortgage commitments (lending agreed to be advanced in the coming months) to £67.6bn, according to the latest figures from the Bank of England.

The BoE’s data also revealed that the outstanding value of all residential mortgages loans was £1,509bn at the end of 2020 Q1, 3.9% higher than a year earlier.

Overall the value of gross mortgage advances in 2020 Q1 was £65.8bn, 3.8% higher than in 2019 Q1.

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Tomer Aboody, director of property lender MT Finance, said: “Overall, and as expected, the lending market enjoyed a great first quarter with plenty of confidence, more lending done and higher loan-to-values offered by the banks, along with cheaper mortgage rates compared with the same period a year ago.

“This was set to be the trend for the year ahead after years of uncertainty created by Brexit.

“Then the pandemic hit and the picture in the second quarter will be very different. But what it ultimately shows is that the fundamentals are there.

“Lenders are keen to lend and now, as we wait for lockdown to end, we need some stimulus from the government to give the housing market the boost it needs.”

By Ryan Fowler

Source: Mortgage Introducer

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Strong mortgage lending in first quarter of the year

The first three months of 2020 saw a rise in mortgage lending before the coronavirus lockdown took hold.

Gross mortgage advances in the first quarter of 2020 totalled £65.8 billion, 3.8% higher than in Q1 2019, the latest figures from the Bank of England show.

This takes the outstanding value of all residential mortgages loans to £1,509 billion at the end of March 2020, which is a rise of 3.9% from a year earlier

The value of new mortgage lending agreed to be advanced in the coming months was 6.1% higher than the previous year, at £67.6 billion.

Almost three quarters (73.2%) of the share of gross advances had interest rates of less than 2% above Bank Rate in Q1 2020. This is 10.2% lower than a year ago and was driven by the 65bp cut in Bank Rate in March rather than any significant change in mortgage interest rates.

The share of mortgages advanced in Q1 2020 with loan-to-value ratios exceeding 90% was 5.2%,up by 0.7% from a year ago.

Buy-to-let lending, including house purchase, remortgage and further advance, represents a 14% share of gross mortgage lending, unchanged from Q1 2019.The value of outstanding balances with some arrears increased by 1.8% over the quarter to £13.7 billion, and now accounts for 0.91% of outstanding mortgage balances.

Commenting on the figures, Mark Harris said: “The Bank of England data relates to the first quarter of the year when the impact of Covid-19 had not yet been felt.

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“While this makes it feel very historic, it does show what might have been had the pandemic not hit, with an increase in gross mortgage advances compared with the previous year, as well as the value of new mortgage commitments.

High LTV

Harris continued: “The share of mortgages advanced to borrowers requiring a loan-to-value greater than 90% was 5.2%, an increase on the previous year, illustrating the level of demand for high LTV deals.

“With lenders including Accord, Clydesdale and Virgin Money pulling out of the 90% LTV market this week owing to high demand, after only recently returning when physical valuations were once again allowed, there is clearly a need for the big lenders to commit to this market.

“The number of people taking out high LTV mortgages in the second quarter is likely to fall considerably, not due to lack of demand but lack of products available.

A spokesperson for Virgin Money commented: “We’ve been one of only a few lenders offering 10% deposit products, however we have seen strong increases in demand from customers with small deposits.

“To protect the service for existing customers as well as pipeline applications, we are temporarily withdrawing our 90% LTV products. These products will still be available for existing customers looking to do a product switch. This change means we can continue to focus on providing existing customers with the level of service they’ve come to expect.

Buy-to-let

Referring to the buy-to-let figures, Harris said: “Encouragingly, buy-to-let lending was stable, even though the sector has come in for a lot of change on the tax and regulatory front. Investors are adapting to the new environment and tailoring their portfolios accordingly.

“The impact of tenants unable to pay their rent is providing a further challenge for landlords, although of course this won’t be apparent until the second quarter figures.’

By Joanne Atkin

Source: Mortgage Finance Gazette

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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