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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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What to expect from the 2020 mortgage and property market

As the new year and new decade roll in to play, we ask three mortgage and property experts about what homebuyers can expect to see in 2020.

Looking ahead to 2020 in the mortgage market, we’ve got to consider how Brexit will continue to impact interest rates and buyer‘s confidence. The UK is due to leave the European Union on 31 January 2020, after Boris Johnson’s Brexit deal was passed by MPs.

Following this, we may see some recovery in the economy and rates might start to rise steadily to maintain inflation. Political uncertainty has gripped the housing market for the past three years with many holding off buying and selling. As a result, there’s been a recent fall in mortgage lending.

However, the reassurance that comes with a five-year administration following the latest general election may encourage those prospective and current homeowners who had previously adopted a ‘wait and see’ approach to commence buying and selling. We’re hopeful we’ll see activity in the housing market increase.

With 35,010 new first-time buyer mortgages completed in the summer of 2019 we’re also hoping that the level of first-time buyers entering the market will continue to grow. It’s clear that despite Brexit, first-time buyers still aspire to get on the property ladder.

However, while the Help to Buy ISA has assisted more than 225,000 home buyers since 2013, this was withdrawn by the government in November. The government also plans to end the Help to Buy equity scheme by 2023.

For those who do want to protect themselves against Brexit-linked uncertainty, it’s worth considering a fixed-rate deal. Knowing how much repayments will cost each month will give some peace of mind. However, it’s always important to take any personal and future circumstances into account when securing a mortgage and seek advice from a broker to ensure you’re aware of the options.

‘Growing feeling that the London market has now bottomed out’

Andrew Montlake, managing director of UK mortgage broker Coreco:

With the General Election result finally delivering political clarity in relation to our exit from the EU, transaction levels look set to pick up in 2020.

Clearly a lot of the hard work around Brexit has yet to be done, but the political stability provided by a strong Conservative majority will give a lot of people the confidence to finally move home.

There’s a huge amount of pent-up demand for property and that will start to show through quite early in the New Year. In 2020, Spring for the property market is likely to start in mid-January.

With competition among lenders reaching feverish new heights, mortgage rates will remain highly attractive during 2020, giving people even more reason to buy and sell.

In recent years, the regions have outperformed the capital and while this trend may continue in 2020, there is a growing feeling that the London market has now bottomed out.

Affordability will remain a key issue for many borrowers, especially in London and the South East, and so the Bank of Mum and Dad, or Gran and Grandad, will play as critical a role as ever.

The first half of the year may see more activity than the second, as the feel-good factor caused by the General Election result slowly fades and the complexity of the trade negotiations ahead becomes clearer.

Overall, we expect average prices to rise by 2–3% during 2020, conservative growth in historical terms but significantly up on the sub-1% growth of recent years.

‘Degree of certainty may trigger flurry of activity’

More than a quarter (28%) of estate agents expect house prices to fall next year, down from 43% last year when agents were asked the same question. Over half (56%) of agents expect house prices to stay the same, according to NAEA Propertymark (National Association of Estate Agents).

A quarter think the number of sales made to first-time buyers will increase and over half (58%) expect it to stay the same. A third expect demand to decrease and a further quarter (28%) think supply will increase.

Mark Hayward, chief executive, NAEA Propertymark:

The changing political landscape throughout 2019 has undoubtedly caused uncertainty in the housing market, which in turn has affected sentiment and decision-making. Once the current political impasse is resolved and it’s clear how and when we’ll be leaving the EU, we hope there will be a degree of certainty which may trigger a flurry of activity.

Regardless of the colour of the new government, housing must be a priority. A clear strategy is needed to tackle key issues such as stamp duty costs.

Additionally, we’d like to see the government commit to bringing regulation into the sector as soon as they can in the New Year and to consider the introduction of digital logbooks to allow for a more interactive, streamlined and transparent process for home buyers and sellers.

The housing market needs reassurance from the government, which will in turn inject some confidence in the market for both buyers and sellers.

Despite the difficult year, the UK property market remains a strong sector overall, and has demonstrated a huge amount of resilience in the face of political turmoil. We hope for a more certain outlook and some stability in 2020, which is hopefully provided sooner rather than later.

Source: Your Money

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UK Finance: Mortgage market is still strong

Despite a backdrop of uncertainty, the mortgage market is still strong and competitive, UK finance chief executive Stephen Jones said at the regulator’s annual mortgage dinner.

He pointed to figures showing that gross mortgage lending will reach around £265bn in 2019, almost the same as in 2018.

Jones (pictured) said: “Our industry wants to focus on competitiveness, innovation, talent, tax, regulatory proportionality and coordination, and regulation fit for the future, all themes that underpin UK Finance’s work for our members.

“At UK Finance we seek to help our members, large and small, navigate change.

“A growing number of first-time buyers are entering the housing market, while existing homeowners are taking advantage of competitive products available in a low interest rate environment.

“The potential end of Help to Buy in 2023 presents a major challenge to growth in new housing delivery.

“We will continue to engage with governments across the UK on initiatives to support low cost home ownership and increase the new supply of affordable and social housing, and to ensure that housing association lending and investment continues to be attractive.”

He warned about the challenges that remain, for example 5-year fixed mortgages now account for nearly half of all fixed rate sales, a market where 2-year deals once dominated.

Jones added: “Longer terms will inevitably mean fewer remortgages in the coming years, which the industry must deal with.

“Our figures show that, despite challenging conditions in the buy-to-let market, lenders are continuing to support and work with landlords, to ensure sustainable and affordable finance is available for the private rented sector.”

By Michael Lloyd

Source: Mortgage Introducer

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Mortgage boom helps drive northern powerhouse

The mortgage market is booming in the North of England with the number of first-time buyers soaring to a pre-financial crisis high.

Figures released today by UK Finance revealed, in 2018, the mortgage industry helped nearly 85,000 households buy their first home in the region – which is made up of the North West, North East and Yorkshire and Humber.

This is an increase of 3% on the previous year and is the highest level since 2006, according to UK Finance which is publishing the data to coincide with its ‘Northern Powerhouse’ dinner to discuss how financial services can support the region’s economy.

These strong figures, it suggested, were down better affordability in regions of the North, where the average deposits and income multiples were lower than anywhere else in England. It said there was an increase of 1.1% in the number of home movers.

Buy-to-let hotspots

It wasn’t just residential mortgages which were helping to drive the boom. Newcastle, Liverpool and Hull bucked the national trend and experienced strong growth in buy-to-let lending, UK Finance revealed.

It said this had been driven by lower house prices and a healthy labour market as well as strong rental demand. This allowed landlords to achieve higher yields than the UK average.

The growth in Hull was particularly strong – with buy-to-let lending soaring by 12.8%.

Jackie Bennett, director of mortgages at UK Finance, said: “These figures show the North of England has a strong and dynamic mortgage market, with lenders helping thousands of first-time buyers onto the housing ladder.

“This has been combined with a steady increase in home movers, making it easier for buyers to find a property that suits their needs.

She added: “The mortgage industry stands ready to work with the UK government and local authorities to capitalise on these strengths and help deliver on the full economic potential of the Northern Powerhouse.”

Strong regional disparities

While the figures were good news for the North of England, they also exposed weaknesses in other parts of the UK, particularly in London.

Shaun Church, director of Private Finance, said they highlighted the strong regional disparities in both housing demand and activity.

“Comparatively low property prices and strong rental demand makes the North an attractive prospect for landlords,” he said.

“After years of being slammed by regulatory changes making it harder to turn a profit, investment location has never been more important. Northern regions are still enjoying decent house price growth, meaning landlords can also enjoy an increase in the value of their asset.”

By Kate Saines

Source: Mortgage Finance Gazette

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UK mortgage lending perks up in Brexit lull, consumer credit softer

Britain’s housing market appeared to benefit from a brief lull in Brexit worries last month, Bank of England data showed on Monday, but consumer lending growth was the weakest in over five years, adding to the mixed signals coming from the economy.

Uncertainty about Brexit has weighed on house prices, especially in London and southeastern England, since voters decided in June 2016 to leave the European Union.

But there have been signs of a stabilization coinciding with the decision to extend the original March 29 deadline for Britain’s EU departure until the end of October, and the closely watched RICS poll of surveyors has recovered in recent months.

The BoE said the number of mortgages approved for house purchase rose to 66,440 in June from 65,647 in May.

That was the highest since January and above the average forecast from economists in a Reuters poll.

Net mortgage lending, which typically lags behind approvals, also rose more than expected, up by 3.7 billion pounds ($4.6 billion) in June.

“June’s mortgage data ties in with the view that housing market activity has got some help from the avoidance of a disruptive Brexit at the end of March,” Howard Archer, economist at EY ITEM Club, said.

Faster wage growth and a jobs boom are also supporting house prices but Archer said he expected them to rise by no more than 1.5% this year, roughly their current growth rate.

If Britain leaves the EU without a deal on Oct. 31 – something Prime Minister Boris Johnson says his government is actively preparing for – then house prices could quickly fall by around 5%, Archer added.

Last week industry body UK Finance reported the number of approvals for house purchase near a two-year high in June, while its measure of consumer lending growth picked up slightly.

The BoE said net lending to consumers in June alone rose by 1.046 billion pounds, again faster than forecast and stronger than in recent months.

However, it is lower than the average monthly increase of around 1.5 billion pounds chalked up in the 12 months to June 2018 and the annual rate of lending growth slowed to 5.5% from May’s 5.7%, the weakest since April 2014.

British consumer spending has been a driving force of growth since the Brexit referendum, helping to offset a drying up of business investment. But in recent months it has lost momentum.

The slowdown partly reflects strong spending a year ago, boosted by major sporting events, such as the men’s soccer World Cup, and better weather.

By contrast, business lending rose by 2.6 billion pounds in June – above its post-referendum average – to give an annual growth rate of 4.4%, the highest since the series started in 2012.

“Firms haven’t suddenly adopted a defensive mindset, despite the risk of a no-deal Brexit,” Samuel Tombs, an economist at Pantheon Macroeconomics, said.

Increased borrowing was concentrated in larger firms, however, and borrowing by small businesses was almost flat.

A separate survey by Bibby Financial Services, which offers trade finance, reported that half of small businesses feared a recession this year and 44% were struggling with cashflow, in part due to pre-Brexit stockpiling of raw materials.

Reporting by David Milliken; Editing by Raissa Kasolowsky

Source: UK Reuters

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Government urged to hold off on further buy-to-let interventions

The Government is being urged to hold a moratorium on further buy-to-let interventions after analysis found the market has swung in favour of large institutional landlords.

Research by the Intermediary Mortgage Lenders Association (IMLA) – based on the Government’s 2018 English Private Landlord Survey – warned that further changes could affect rental supply and mean higher rents for tenants.

IMLA’s analysis found professional landlords, as of the end of 2018, represent 48% of the private rental sector, up from 38% in 2010.

In contrast, the number of single-property landlords has fallen from 40% to 21% over the same period.

This was blamed on a tougher mortgage market, the increasing size of the build-to-rent sector and mainly, IMLA claims, due to Government changes such as additional Stamp Duty and the scaling back of mortgage interest relief making buy-to-let less profitable.

Kate Davies, executive director of IMLA, said: “We are concerned that layers of Government intervention have adversely affected small-scale landlords’ ability and appetite to invest in properties over recent years.

“As increased tax and regulatory responsibilities increasingly disincentivise landlords, we face a possible topping out of the private rental sector (PRS).

“While it’s good to see professional and institutional investors increasing their stake in the nation’s housing stock, the number of one-property buy-to-let investors has fallen by almost half.

“Squeezing the PRS puts the pressure on millions of renters in Britain. We are strong advocates of a fair market with a quality supply of homes. Restricting the PRS risks a lack of supply, rising rents and a fall in the quality of rental accommodation.

“We have repeatedly called for Government to put the brakes on regulating and taxing our nation’s landlords. We urge a more moderate approach to ensure our private rental sector remains strong for the millions of renters who rely on it.”

By MARC SHOFFMAN

Source: Property Industry Eye

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Mortgage approvals down slightly in May

Mortgage approvals for house purchases, an indicator of future lending, fell back slightly from April to 65,400 in May, the Bank of England’s Money and Credit statistics has found.

Approvals remained broadly in line with the narrow range seen in previous years.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “The number of mortgage approvals for house purchase, which indicate at what level future lending will be, fell back slightly in May but remain broadly in line with the narrow range seen in previous years.

“It shows that the mortgage market is trundling along quite steadily with no great shocks either way. This is reassuring as there is plenty of political and economic uncertainty, which is preying on people’s minds and creating a delay when it comes to making big decisions

“Lenders remain keen to lend and several have cut rates in recent weeks, so mortgage rates are likely to remain low for a while yet, further supporting the market.”

Net mortgage borrowing by households fell to £3.1bn in May, the smallest increase since April 2017. However, the annual growth rate for mortgage lending remained stable at 3.2%, and has now been around 3% since late 2016.

John Phillips, operations director at Just Mortgages and Spicerhaart, added: “There is not a huge change here; net mortgage borrowing fell slightly, but the annual growth rate for mortgages has remained stable at 3.2%, which means it has now been steady at around 3% for almost three years.

“Approvals, however, were down for both house purchase and remortgaging, which could suggest that lending will fall over the next few months and growth may slow too.

“There is no doubt that it has been a funny old few years for the mortgage market. Brexit has obviously had – and is still having – an impact, but I don’t think it is the only factor at play.

“For many years now, borrowing costs have been very low, but wages have not been keeping pace with house prices, so while mortgages are affordable, deposits and stamp duty are not.

“Those who may have upsized in the past are now either remortgaging to borrow more and then extending, or just saving the money they would’ve used on stamp duty and investing it into their existing homes.”

Phillips said that if the government wants to get things moving again, it needs to do something about the cost of moving, in particular stamp duty.

He said: “People are simply not prepared to throw thousands of pounds that could be used to invest in a bigger home on stamp duty.

“Back in April, the House of Lords Committee on Intergenerational Fairness and Provision recommended changes to stamp duty because, they said it is ‘seriously distorting the market’ and I think they’re right. Until something is done about the crippling cost of stamp duty, the market will continue to struggle.”

The number of approvals for remortgaging fell in May, to 46,700.

Nick Chadbourne, chief executive of conveyancing solutions provider LMS, added: “Remortgage activity figures from the Bank of England show the market is resilient, buoyed by near record low interest rates and high product expiry rates in Q2 this year.”

“In fact, LMS’ latest remortgage snapshot shows that there was a spike in remortgage activity to 53,624 and almost half of those who remortgaged opted for a 5-year fixed rate deal.

“LMS’ data also shows 65% of borrowers expect an interest rate rise within the next year, so we expect the trend towards long-term fixed rate deals to continue throughout 2019.”

Kevin Roberts, director, Legal & General Mortgage Club, said: “The government’s Help to Buy scheme has improved affordability for first-time buyers, and with mortgage lenders increasingly offering 95% loan-to-value products, they have unparalleled access to the finance they need.

“The low interest rate environment has also encouraged existing homeowners to remortgage onto longer fixed-term products – giving them certainty over their future repayment costs.”

By Michael Lloyd

Source: Mortgage Introducer

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Home-movers drive mortgage market after a drop in remortgaging

First-time buyers and home mover mortgage lending rose in April, but there was a drop in remortgage business

There were 27,370 new first-time buyer mortgages completed in April 2019, 7.9 per cent more than in the same month in 2018, according to UK Finance.

The trade body, which represents mortgage lenders, also found an increase in home mover mortgages – there were 25,450 completed in April 2019, 6.4 per cent more than in the same month a year earlier.

However, remortgage business fell in April, with an 3.1% drop in borrowers switching their deal compared to a year earlier.

Andrew Montlake, director of mortgage broker, Coreco, said: “Given Help to Buy, the strong jobs market, increased product choice at higher loan-to-values and lower house prices, it’s no surprise first-time buyers were the key driver of activity in April.

“The increase in homemover mortgages also underlines how Brexit indifference trumped Brexit uncertainty in the first quarter of the year.

“During 2019, the whole issue of Brexit has become so surreal that many households are no longer willing to put their real lives on hold for it, all the more so given that interest rates are at rock bottom.”

Buy-to-let holds steady

There were 5,100 new buy-to-let house purchase mortgages completed in April 2019, the same as this time last year, said UK Finance.

There were 14,400 remortgages in the buy-to-let sector, also the same as this time last year.

Montlake added: “What’s interesting is that the impact of recent tax changes on the buy-to-let market appears to have settled down.

“The buy-to-let market is not what it was but has now reached a new equilibrium.”

Written by: Christina Hoghton

Source: Your Money

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The main growth areas are specialist resi and buy-to-let

The main growth areas in the mortgage market are specialist residential and buy-to-let, Louisa Sedgwick, director of sales for mortgages at Vida Homeloans, has argued.

Sedgwick said education is needed to help brokers understand specialist areas. Vida provides webinars, workshops and regional blogs by key account managers.

One area Vida has seen an uplift in is expat buy-to-let since the 2016 EU Referendum.

Sedgwick said: “Any growth in the market has to come from the specialist area and the more education there is, the greater the market will grow. We’re trying to find different ways of educating brokers.

“Before we voted to leave prices were more expensive and since the vote have dropped, making the property market more vulnerable.”

Payam Azadi, director of Niche advice, agreed and said he’d done more expat buy-to-let business this year than previous years.

He added: “As lenders start looking for more margin and diversifying their proposition, they’re going to be going into the more specialist sectors.

“We have seen a lot of lenders diversify firstly into specialist buy-to-let, for example, lending on houses in multiple occupation (HMOs) and expat buy-to-let, but there’s also other sectors lenders have moved into.

“There’s another batch of lenders looking to loosen criteria around adverse credit and others looking at affordability. There are a number of strategies from different lenders. It depends on how they’re funded and what the funders’ risk models are and what margin lenders have to give back to their funders.

“Within the specialist market margins are under pressure, so it’s great saying you’re going into this sector but it’s about how much money you can make there. You’ve seen lenders look at different areas to give edge over competition.”

By Michael Lloyd

Source: Mortgage Introducer

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Limited company buy-to-let criteria is the battleground for lenders

Half a decade ago, there would have been few in the mortgage market who might have predicted limited company buy-to-let as one of the major growth areas in the years ahead. Without reckoning on some considerable government and regulatory intervention, how could they know?

But, that’s exactly what the buy-to-let sector and landlords have been subjected too, and while there appears to be no let up in that regard, the market has shifted to accommodate how landlords might wish to take their portfolios forward and how they can try and secure the mortgage interest tax relief which has been steadily cut for those holding properties in their own names.

While we might not have seen a big move of existing rental properties into limited company vehicles – blame the stamp duty increase for that – landlords are now much more likely to purchase new properties within a limited company vehicle, and because of this, even our very biggest buy-to-let lenders have needed to respond to the shifting nature of the sector.

Indeed, as time goes by, and landlords see how the ongoing cuts to mortgage interest tax relief impact on their profitability, you can’t help wondering if – even with the large stamp duty outlay – landlords might feel they need to bite the bullet and move existing properties (held in their individual names) into those limited companies.

I suspect that if these landlords are looking at holding these properties over the very long-term then a decision might be made to take the stamp duty hit now, rather than later when the property’s value might increase that payment. It is though a fine line to tread as a mortgage adviser and the last thing you should be doing is weighing into such a debate if you’re not also a specialist tax advisor.

Instead, if your client comes with you and wants to discuss this, and they have not already done so with their tax specialist and secured their advice, then you might want to curtail any conversation until they have done so. It may well be the right thing for the client to do but you don’t want to be the individual blamed for such ‘advice’ if its later found out not to be.

Overall, however, the growth in limited company business has come predominantly via new purchase activity and, as mentioned, there are now few buy-to-let lenders who are not offering products for this type of lending. Just last week the Saffron Building Society launched its limited company buy-to-let mortgage and while it perhaps won’t have the considerable impact that its mutual cousin, Nationwide, did when it moved into the sector, it is another potential product option for advisers with clients in this market.

Indeed, you might perhaps say that the limited company buy-to-let client is now incredibly well served in terms of product numbers, and the real battleground for lenders is around the criteria they offer to landlords. Pricing is competitive but what seasoned portfolio landlords are likely to want is a significant degree of flexibility in terms of the administration burden placed upon them in trying to secure a mortgage.

We’ve certainly seen a shift in this direction too, with a number of lenders not requiring business plans now or insisting on a complete run-down of every other property in the portfolio, when it is unrelated to the property which requires a mortgage. While the client’s existing portfolio should be understood, and I completely understand why lenders don’t want to be over-exposed to one landlord or indeed certain types of property, lenders might be historically viewed as over-sensitive in this area. Again, that appears to be changing as increased competition has made itself felt.

There is also an argument that we are at saturation point when it comes to buy-to-let propositions. I saw a recent roundtable of ostensibly bridging lenders who voiced a similar concern and appeared to be coming to the common-sense view that, while they might wish to be involved in the buy-to-let market, unless they could come to it without something new and unique, or they were willing to go incredibly high up the risk curve, there appeared little point in them moving in that direction.

Overall, however, when it comes to finance options, the market appears to be rosy for landlords. Wider problems around increased costs and decreased profitability might persist, but the tenant demand is there, and if they can get new property at the right price, in the right area, within the right tenant demographic, then buy-to-let remains a strong investment for them. And advisers will be fully in demand to work out the best finance to support their activities.

Source: Mortgage Introducer