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Mortgage borrowing rises in November, BoE data shows

Net mortgage borrowing increased from £1.1bn in October 2021 to £3.7bn in November, show new figures from the Bank of England (BoE)

However, November’s figure is £2.9bn below the 12-month average to June and is some way off the £9.1bn of net borrowing seen in September.

October’s low figure was driven, according to the BoE, by borrowing “brought forward to September to take advantage of stamp duty relief before it was completely tapered off”.

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House purchase approvals were largely unchanged in November, at 67,000, with a value of £14.8bn, while the remortgage approval figure increased from 42,000 in October to 44,500 in November, rising in value from £8.8bn to £9.3bn.

“The fact that approvals for remortgaging rose in November shows that there are people that have either given up looking for available property to move to or that are determined to lock into a longer term-fixed rate deal before interest rates rise again,” says Phoebus Software sales manager Richard Pike.

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“This [remortgage] data only captures those moving to another lender and not product transfers, of which there are likely to be many,” adds SPF Private Clients chief executive Mark Harris.

“A significant pick-up in remortgaging is expected this year as the threat of interest rate rises combines with many people coming off existing mortgage deals,” he continues.

The BoE data also shows that the effective interest rate for new mortgages dropped to 1.50 and the rate on outstanding mortgages fell to 2.02% – both a series low.

By Gary Adams

Source: Mortgage Finance Gazette

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Mortgage lending expected to surge to record £316bn in 2021

Mortgage lending is expected to top £316bn by the end of 2021 after house sales rose to their highest level since the financial crash.

In the UK gross mortgage lending is expected to peak this year at £316bn, up 31 per cent on 2020 as it receives a boost from the UK stamp duty holiday. Next year lending is expected to moderate to £281bn before increasing to £313bn in 2023, according to new data from UK Finance.

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James Tatch, Principal, Data and Research at UK Finance, said, “2021 has been a bumper year for mortgage lending amid the stamp duty holiday and homeworkers moving from cities. The outlook for the housing and mortgage markets over the next two years is for a return to more stable, balanced picture following the upheavals of the last two years.”

Total house purchase transactions are expected to reach 1.5m in 2021, some 47 per cent higher than 2020 and the highest number since before the Global Financial Crisis. Buy-to-let activity has followed a similar trend to the residential sector, with purchase activity increasing to £18bn, up 83 per cent on 2020.

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While housing market will inevitably soften in 2022 as the demand stimulus from the stamp duty holiday will no longer be a factor boosting house purchases other Covid-19-triggered behavioural changes could provide continued impetus according to the report which predicted a resurgence in homemover numbers following a decade of stagnation.

By LILY RUSSELL-JONES

Source: City AM

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LMS: Remortgage completions up 108%

The volume of remortgage completions rose by 108% in September, according to the LMS Monthly Remortgage Snapshot.

Instruction volumes also increased, rising by 50% over the same timeframe.

The overall cancellation rate rose by 0.43% to 5% and pipeline cases increased by 7% in last month.

The average monthly payment decrease for those who remortgaged in September was £235.

A total of 45% of borrowers increased their loan size and 50% of those who remortgaged took out a 5-year fixed rate product, which was the most popular product length.

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An estimated 28% of remortgagers’ primary aim when remortgaging was to release equity from their property.

The average loan increase post remortgage was £21,584, whilst the average loan decrease post remortgage was £12,607.

The average remortgage loan amount in London and the South East was £288,939, while the average for the rest of the UK stood at £148,978, putting remortgage loan amounts 48% higher in London and the South East than the rest of the UK.

The longest previous mortgage length was found in the North East at 75.88 months (6.32 years) and the shortest was in East Anglia at 59.92 months (4.99 years), putting the longest previous mortgage term 26.64% longer than the shortest.

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Nick Chadbourne, chief executive of LMS, said: “Remortgage instructions rose by 50% in September as rumours of an interest rate rise loom large, which may impact the cost of mortgages.

“Savvy borrowers nearing the end of their current term, and their brokers, will have anticipated this and have begun to shop around to secure a longer fixed-rate deal to weather any increases in their monthly repayments.

“The number of remortgage completions soared to 108%, as September marked one of the highest numbers of ERC expiries of the year.

“As some lenders will be inundated with cases as a result of the current rate wars, panel managers will have an important role to play in mitigating any mismatch in capacity across the industry, by ensuring that instructions are evenly balanced between firms to maintain service levels.”

By Jake Carter

Source: Mortgage Introducer

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Mortgage borrowing picks up in September, BoE finds

Net mortgage borrowing hit £9.5bn in September, a significant jump from the £4.4bn seen in August, according to new Bank or England (BoE) data.

This increase, says the BoE, “was driven by borrowing ahead of the complete tapering of lower stamp duty from October.”

It is the highest number seen since June 2021’s record of £17.1bn, the bank adds.

Alongside this, gross mortgage lending “increased sharply”, from £20.9bn to £30.7bn.

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Approvals for house purchases, meanwhile, fell on a monthly basis, from 74,200 to 72,600 while the value of this metric ticked downwards from £15.5bn to £15.3bn.

And approvals for remortgages increased slightly, from 40,000 to 41,500, with the value rising from £8bn to £8.4bn.

North London estate agency and former Rics residential chairman Jeremy Leafe says: “[These] numbers come at a particularly interesting time when the high borrowings showed buyers and sellers rushing to take advantage of the stamp duty holiday, whereas still relatively high approvals demonstrate a confidence to move even without the support of the concession.

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“Worries about inflation and mortgage rates, which are even higher since the Budget, do not seem to be reducing activity while demand particularly for family houses continues to comfortably outpace supply.”

And Mark Harris comments: “This is likely to be the last set of numbers from the BoE where the effective interest rate on new mortgages falls as several lenders, including Barclays, HSBC, NatWest and TSB, have all since raised their pricing in anticipation of a base rate rise next week.

“With the BoE hinting at a rate rise, and the Chancellor in his Budget referring to an average rate of inflation of 4% next year, all signs are that the official rate will rise for the first time since March 2020.

“Whether base rate rises or not, mortgage rates have started edging upwards as the markets have already priced in a rate rise, and possibly two or three more by the end of next year.”

By Gary Adams

Source: Mortgage Finance Gazette

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Mortgage repayments reach record £38bn in H1 2021

Mortgage repayments increased by 20% in H1 2021, to reach a record £38bn, according to the Equity Release Council’s (ERC) Autumn 2021 Market Report.

This is the equivalent of £200m a day, or £3,500 for every mortgaged household.

The ERC said the trend has been fuelled by regular repayments and overpayments reaching record heights, new borrowing ahead of the stamp duty deadline and fewer mortgage payment holidays.

The report found that the nation is now carrying over £1.5tn of mortgage debt for the first time on record, but factors including house price rises mean that for every £1 of mortgage debt, there is more than £3 of equity in homes.

The value of UK housing stock rose from £5.67tn to £6.42tn over the past year, with private property wealth reaching a new high of £4.87tn.

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Strong performance in the housing market saw UK private property wealth increase from £4.21tn at the end of H1 2020 to £4.87tn at the end of H1 2021.

Households repaid more than £19bn of mortgage capital during both Q1 and Q2 2021, having never repaid more than £18bn in any previous quarter.

Rising property prices mean more than three quarters of the value of the average home has been tied up in equity rather than debt, leaving £201,642 of property wealth for an owner to draw on.

Across the first half of 2021, 35,860 new and returning customers were served, unlocking £2.3bn of property wealth.

Customer numbers steadily rose in H1 2021, with June seeing the most new plans agreed (3,348).

New customer levels remained broadly consistent with those seen in H2 2020, dipping slightly from 21,917 to 21,596 new plans taken out, but higher than this time last year when the first lockdown slowed activity (18,420).

Lifetime mortgage product options doubled in the past two years.

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The total number of equity release products available increased to a record high of 668 in July 2021, from 448 six months earlier.

More than two-thirds (68%) of products allow customers to make voluntary capital repayments with no early repayment charge (ERC), while 89% of products offer fixed ERCs.

The average equity release rate rose to 4.26%, but there are still more options available today with rates of 4% or lower than a year ago.

The average age of new customers remained stable in H1 2021 at 70 years old for drawdown and 68.4 for lump sum.

And the average house price of new customers continues to rise to record levels for both drawdown (£419,166) and lump sum (£406,139) plans.

This came as UK property prices have increased over the last year to reach an average of £265,668.

David Burrowes, chairman of the ERC, said: “UK households are converting unprecedented amounts of mortgage borrowing into property wealth as we look to move on from the worst of the pandemic.

“Combined with property price rises fuelled by the stamp duty holiday, homeowners have record equity to potentially draw upon in later life.

“The transformation of later life mortgages in recent years has given people more opportunities to access their biggest source of wealth.

“We are seeing mindsets change to the point that tapping into property wealth is now a common consideration to meet various retirement needs, from topping up pension income to providing a ‘living inheritance’ via gifting to younger generations.

“The modern equity release market has shown resilience in the face of uncertainty to climb back towards pre-pandemic levels.

“The disruption of the last 18 months has not slowed the pace of innovation in lifetime lending, and it is important the market continues to evolve to address the financial challenges people will face in the post-pandemic world.”

Stuart Wilson, corporate marketing director of more2life, added: “Following the end of the stamp duty holiday and the severe disruption to markets and personal finances over the past 18 months, the news today that mortgage repayments have risen by 20% to record highs is a testament to the strength of the UK housing market and the savvy savings behaviour of UK consumers.

“Though the report does mention some grey clouds around the UK’s record level of mortgage debt, there is a significant silver lining in that rising house prices have led to the amount of equity in our homes being three times the level of debt owed.

“With a record high of £4.87trn of private property wealth in the UK, there is a fertile landscape for consumers looking to unlock the wealth tied up in their homes and afford the retirement lifestyle they deserve in their autumn years.

“The hard work of the equity release market to innovate and create better outcomes for borrowers is evident in the doubling of product options in the last two years, allowing consumers greater opportunity to find the right equity release product for them.

“Accessing property wealth remains one of the best ways for over-55s to achieve their forever homes, move closer to family or afford renovations to make life more comfortable, and today’s report shows that the market is working hard to live up to its potential and support later life borrowers in retirement.”

By Jake Carter

Source: Mortgage Introducer

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Mortgage arrears remain low as payment holidays come to an end

Mortgage arrears remain close to historically low levels due to the mitigating effects of payment deferrals and other tailored forbearance, according to the latest figures from UK Finance.

Q2 saw 26,560 homeowner mortgages in early arrears (those between 2.5% and 5% of balance in arrears), down 5% on Q1.

Some 27,910 homeowner mortgages had more significant arrears (10% or more of the outstanding balance), an increase of 630 on the previous quarter.

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210 homeowner mortgaged properties and 230 buy-to-let mortgaged properties were taken into possession in the second quarter of 2021.

Steve Seal said: “While it’s encouraging to see mortgage arrears remain close to historic lows, the picture could look very different in the coming months. Mortgage payment holidays have now come to an end, and with furlough and the Self-Employment Income Support Scheme set to end in September, there’s likely to be more homeowners who will struggle to keep up with mortgage repayments.

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“This may only be short-term for some borrowers, however it is something that could impact their credit profile in the long-run. As a result, many of these customers risk being turned away from highstreet lenders and may not know where else to turn. This is where the specialist lending market has an increasingly important role to play.

“As an industry, it is our responsibility to support this cohort of customers which is only set to grow post-pandemic, signposting them to the options available and highlighting how the specialist market can cater to their unique needs.”

Source: Mortgage Introducer

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Remortgage completions fall 5% while instructions rise

The volume of remortgage completions fell by 5% in June, according to the LMS Monthly Remortgage Snapshot.

However, while remortgage completions slowed, instruction volumes increased by 16.% over the same timeframe.

The overall cancellation rate decreased by 0.45% to 6.01%, while pipeline cases rose by 11% in June.

The average monthly payment decrease for those who remortgaged was £200, and the average monthly mortgage increase was £261.

A total of 42% of borrowers increased their loan size and 49% of those who remortgaged took out a 5-year fixed rate product, which was the most popular product length.

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More than a third (36%) of remortgagers said their primary aim was to release equity from their property.

The average loan increase post-remortgage was £21,586, whilst the average loan decrease was £12,217.

The average remortgage loan amount in London and the South East was £283,685, while the average for the rest of the UK stood at £143,220; this puts remortgage loan amounts 98% higher in London and the South East than the rest of England and Wales.

The longest previous mortgage length was found in the North East at 84.36 months (7.03 years) and the shortest was in the West Midlands at 62.59 months (5.2 years), meaning that the longest was 35% longer than the shortest.

Nick Chadbourne said: “Steady activity and easing restrictions continued to improve lender confidence in June which gave borrowers greater product choice and better deals.

“However, instructions were still not as high as we would expect in the lead up to the large number of [early repayment charge (ERC)] expiries in July.

“This means that many borrowers who are remortgaging are opting for a product transfer.

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“As low interest rates are still in place across the board, staying with the same lender may give borrowers a cheaper rate than switching, but it is still important that borrowers shop around to ensure they are getting the best deal possible.

“As the purchase market continues to boom, supply is the only factor which might slow it down.

“The end of the stamp duty holiday will have had some impact, but the key drivers to move out of cities, find green space and upsize are all still there to drive demand.

“Until supply is properly addressed, inflated house prices and competitive mortgage rates are expected to stay.

“We expect to see more borrowers opting to stay put in this environment, boosting remortgage activity and contributing to a healthy pipeline in the coming months.”

By Jake Carter

Source: Mortgage Introducer

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UK mortgage borrowing hits a record in June

UK mortgage borrowing hit a record £17.9bn in June as homebuyers raced to complete purchases before the stamp duty holiday started to taper off, Bank of England figures showed.

The net figure was well ahead of the previous record of £11.5bn set in March. There was no large increase in the number of mortgage approvals in recent months, suggesting a shorter time between a lender approving a mortgage and completion.

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Approvals for house purchases fell in June to 81,300 from 86,900 a month earlier. June’s figure was the lowest since July 2020 when the housing market reopened and Chancellor Rishi Sunak announced a sharp, temporary cut in stamp duty for house purchases in England.

Sunak’s cut, which finishes completely at the end of September, helped fuel a frenzy in the housing market as buyers scrambled to capitalise on the reduction. However, the resulting increase in property prices meant most of the gain went to sellers. Households have also been moving house after rethinking their needs with working from home becoming the norm for many.

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The interest rate paid on newly drawn mortgages rose to 1.95% from 1.9% a month earlier and 1.72% in August 2020.

Consumer borrowing remained low as individuals took on £0.3bn of debt in June. Households repaid an average of £1.9bn a month from March 2020 to February 2021. Households deposited an extra £9.8bn with banks and building societies in June, down from an average of £14.7bn in the six months to May and a peak of £27.4bn that month.

By Sean Farrell

Source: ShareCast

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IMLA: “Housing and Mortgage Recovery Will Remain Robust.”

The Intermediary Mortgage Lenders Association (IMLA) has today published its report on the impact of Covid on the UK housing and mortgage market – one year on. This latest report notes the continued strength of the housing market, despite the challenges presented by the pandemic, and predicts that gross mortgage lending will reach £285 billion this year.

In January, IMLA’s New Normal report predicted a rise in gross mortgage lending to £283 billion in 2021, with a swift return to household spending as Covid-19 lockdown restrictions were eased. However, IMLA’s latest report has revised this figure, increasing it to £285 billion – the highest level of mortgage lending since 2007.

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The predictions follow data which show a surge in mortgage lending, stimulated by the strength of the housing market. During the first five months of 2021, lending for house purchase was not only 87 per cent above the same period the previous year, but 51 per cent above the same period in 2019. And while remortgage activity has been weaker, the number of product transfers has risen to record levels.

In light of the high levels of market activity brought forward by the Stamp Duty holiday, however, IMLA has also revised its forecast for gross lending in 2022, reducing it slightly from £286 billion to £280 billion.

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The report, which makes a series of predictions about the market over the coming year, forecasts that house prices will be broadly flat in the second half of 2021 but will rise 1.6 per cent in 2022. House prices have risen as a result of the Stamp Duty holiday, but the report predicts that a more subdued picture can be expected after the holiday fully ends in September.

Kate Davies, executive director of IMLA, said: “Following a difficult period in the wake of the coronavirus crisis, it is very encouraging to see yet another positive prediction for the remainder of 2021. Our findings forecast that 2021 will see the highest level of mortgage lending since 2007 and, with a combination of Government support helping to underpin new purchases and a bumper year for product maturities, we expect this high demand to continue. However, with the Stamp Duty holiday soon coming to an end, and the Help to Buy scheme due to conclude in 2023, there is still a need for a coherent, long-term housing strategy from the Government that embraces the public as well as the private sectors – and delivers a market that meets Britain’s housing needs for the decades to come.”

BY PETE CARVILL

Source: Property Wire

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Mortgage rates fall as choice rises, according to the latest Moneyfacts report

Continued growth in product choice for borrowers, in addition to rate competition, has led to reductions in overall average fixed rates month-on-month, according to the latest Moneyfacts UK Mortgage Trends Treasury Report data.

Nine months of consecutive increases in mortgage availability has seen total product choice reach its highest level in 16 months, with 4,512 deals on offer.

This is an increase of 269 in the last month alone, and the highest this has been since March 2020, when the figure was 5,222.

This is the first time since June of 2018 that Moneyfacts has recorded availability increasing across all the individual loan-to-value (LTV) tiers.

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Borrowers seeking higher LTV products have seen the largest improvements in choice, particularly at 95%, where the research recorded a jump of 61 products compared to June 2021, while the current total of 253 available deals offers 239 products more than there were this time last year.

For only the second time in the past 12 months, both the average overall 2-year and 5-year fixed rates fell over the course of the month, to 2.55% and 2.78% respectively.

Reducing by 0.04% in both cases, these are the largest monthly reductions recorded for either rate since June 2020.

July 2020 logged record lows of 1.99% and 2.25% for these rates, due to the dearth of available deals fuelling these averages, particularly at the higher-rated, higher-risk top LTV brackets.

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Eleanor Williams, finance expert at Moneyfacts, said: “The level of choice available to those looking for a residential mortgage has risen substantially again between June and July, as volumes rose by 269 new products bringing the total available to over 4,500.

“Over the past six months alone availability has recovered by 1,619 – or 56% – and for the first time in over three years, we tracked improvements in choice across all the LTV brackets this month, great news for borrowers with all levels of equity or deposit.

“Our data shows there is further cause for positivity as both the overall average 2 and 5-year fixed rates have fallen.

“At 2.55% the average 2-year fixed rate is at its lowest since February (2.53%), while the average 5-year rate at 2.78% is the lowest since April (2.77%).

“Although the 2-year overall rate is 0.06% above its equivalent rate from a pre-pandemic July 2019, the 5-year overall average rate is 0.07% below its equivalent two years on (2.85%) and could indicate lenders are moving to price longer-term fixed rates more competitively, perhaps reflecting a shift in borrower focus to locking in for stability in these uncertain times.

“First-time buyers and those considering a mortgage at higher LTVs are amongst those to benefit the most from rate cuts, with the average 2 and 5-year fixed rates at 90% LTV falling by 0.15% and 0.08% respectively, while at 95% LTV reducing by 0.09% and 0.06%, respectively, but equally it is impossible to ignore the growing ranks of providers offering sub-1% deals to tempt borrowers with larger levels of equity or deposit as well.

“According to the latest Halifax House Price Index, there was a 0.5% drop in property prices, likely linked to the stamp duty holiday tapering off, but this in no way detracts from the fact that overall prices are up approximately 8.8% on a yearly basis.

“Demand for the very limited supply of property could remain high, as the appetite to either get onto the property ladder or for larger properties with home offices and outdoor space continues, and these borrowers could be enticed by the possible savings lower mortgage rates may bring them.

“Competition is evident across the residential mortgage sector, but there is no guarantee that rates will continue to fall, or for how long these record-low deals may be available for, therefore seeking advice to assess the best true cost deal for their own circumstances would be a wise move by any prospective borrower.”

By Jake Carter

Source: Mortgage Introducer

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