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Brokers see fall in mortgage business

Mortgage brokers have seen the biggest drop in business volumes in more than two years, according to the latest Mortgage Market Tracker from the Intermediary Mortgage Lenders Association (IMLA).

The average number of cases brokers handle on an annual basis dropped by 10% in Q3 2018, from 90 to 81 cases. This is the largest quarterly drop since Q1 2016, when annual average cases fell 11% (82 to 72 cases) in Q1 2016 (Chart 1).

For the first time since 2016, the percentage of brokers who professed to be “very confident” about their own business’ fell, from 68% to 60%.

The drop in mortgage broker activity reflects the drop in the number of mortgage purchase completions on a year-on-year basis. According to UK Finance statistics, the number of first-time buyer, homemovers and buy-to-let investors in Q3 2018 all fell compared to a year ago (Table 1).

Table 1: Number of loans completed, quarterly

Type of loan Number of loans Q3 2017 Number of loans Q2 2018 Number of loans Q3 2018 Percentage change YoY
FTB   96,700 92,900 96,200 -0.5%
Homemover
104,900
89,200 100,000 -4.7%
Remortgage
111,100
113,800 120,800 8.7%
BTL
19,700
15,900 16,700 -15.3%
BTL Remortgage
39,300
41,400 40,800 3.8%

Source: UK Finance

Conversely, remortgage activity continues to remain strong. Quarterly figures for residential remortgages were up more than 6%, annual remortgage activity for both residential and BTL loans grew compared with Q3 2017.

Separate IMLA research also suggests that fewer brokers are feeling positive about the mortgage market in 2018.  In H1 2018, a third of brokers (33%) felt the current market would “improve a little” but by H2 2018 that had fallen to just a fifth of brokers (20%).

The quarterly IMLA Mortgage Market Tracker – which uses data from BVA BDRC– found that for those who move forward with a property transaction, the market continues to work well with nearly nine in 10 (88%) of all mortgage applications via intermediaries leading to offers.

Kate Davies, executive director of IMLA, commented: “These latest survey results show that sentiment among buyers and movers is currently at a low point.  Whilst the Brexit negotiations remain so complex and uncertain, many people may be adopting a ‘wait and see’ approach before moving forward with a property purchase.

“While the national uncertainty doesn’t help the prospects of our mortgage brokers, it’s encouraging to see that when an intermediary does apply for a loan on their client’s behalf, they are being accepted. Mortgages going from application to offer remain at more than two-year highs as intermediary lenders continue to find solutions for clients.”

Source: Mortgage Finance Gazette

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Mortgage market subdued after summer highs

Remortgage levels have steadied after a period of strong summer growth as activity across the mortgage market softened, according to trade body figures.

UK Finance found 35,600 homeowner remortgages and 12,300 buy-to-let remortgages were completed in September – down 0.6 percentage points and 0.8 percentage points respectively on the same month a year earlier.

Jackie Bennett, director of mortgages at UK Finance, said the figures showed remortgaging for residential and buy-to-let properties had levelled out after a period of strong growth, reflecting the number of fixed rate loans reaching maturity.

Meanwhile purchase activity across the residential market fell in September, with 29,400 new first-time buyer mortgages completed in the month – from 35,400 in August and 30,800 in September 2017.

New homemover mortgages also fell to 29,400, down from 38,000 the month before and 32,100 in the same month a year earlier.

Ms Bennett said: “Demand for house purchases for both first-time buyers and homemovers has also lessened, as affordability constraints continue to bear down on consumer demand for new loans particularly in London and the south east.”

The buy-to-let purchase market also softened in September with 5,200 new mortgages completed in the month, 18.8 percentage points fewer than in the same month a year earlier.

Ms Bennett suggested the lending in the buy-to-let market remained subdued as a result of recent tax, regulatory and legislative changes.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said the mortgage market was inevitably subdued as people delayed decision-making while political and economic uncertainty continued.

He said: “This is likely to continue into the spring, until we pass the Brexit deadline in March, by which point some of that pent-up demand may be released and the market could well pick up.”

Mr Harris added: “UK Finance figures do not appear to take into account product transfers, which will have a significant impact on remortgage numbers.

“This market is much larger today than 12 months ago as borrowers opt for the simpler process of sticking with the same lender and moving onto another rate, rather than starting a new application with another lender.”

Source: FT Adviser

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Uncertainty in the UK

Gary Styles, director of GPS Economics, takes a look at the political and economic uncertainty and what that means for the mortgage and housing markets.

There was never going to be a good time in 2018 to assess the prospects for the mortgage and housing market whilst the machinations of Brexit continue and the dynamics of the world economy evolve. We all hope that the fog of uncertainty will lift in the next couple of months but we cannot be sure of that. Many of us believe that November will represent the time when we get down to brass tacks and a deal is finally agreed between the EU and the UK.

In the meantime, we all need to plan and in most cases to focus on the most likely outcome – however dull and ill-specified.

During the latest forecast round I have tried my best to ignore the vastly differing assessments coming from the respective vested parties as we all know they are unlikely to be correct. Our experience in the run up to the EU referendum in June 2016 has aptly demonstrated that even the most respectable economic houses and authorities get drawn into the political sphere and often damage their own long term reputations as a result.

The shifting UK economic background 
The UK economy and labour market have both been very supportive to the mortgage sector in recent years. GDP growth has averaged over 1.75% over the last two years and the unemployment rate fell from 5.1%% to 4.4% over the same period. The latest readings from the labour market show unemployment at 4% and regular average earnings growth of 2.9%, the highest earnings growth since mid-2015.

However, the UK’s overall growth performance hides a disappointingly unbalanced picture. The often promised investment and export-led growth has been replaced by the more typical pattern of debt and consumer-led growth.

The UK economy slowed sharply in the first half of 2018 although the more recent indicators for Q3 are far more encouraging with output up 0.7% in the three months to August. GDP growth for the whole of 2018 looks on track to be near 1.4%, which is still around 0.3% lower than in 2017 and well below trend.

Interest rates are expected to rise further in 2019 as import costs including fuel costs rise on the back of a weaker exchange rate and firmer global commodity prices. It seems likely that many commentators have underestimated how quickly interest rates will need to rise even against a backcloth of weak domestic output indicators.

Key mortgage and housing numbers 
The latest mortgage lending data for August from the Bank of England shows the mortgage market continuing to ease particularly in the house purchase market. The underlying number of house purchase approvals is down by around 2% when compared to the same period last year. The recovery in remortgage and other secured borrowing has helped to soften the speed of the overall slowdown but the direction of travel is clear.

We expect ONS annual house price growth to ease to around 2% by the end of 2018 with the Nationwide and Halifax annual growth measures between 0 and 2%. Assuming the UK negotiates an acceptable deal with the EU by November, house prices look set to ease by 1-2% during 2019 before recovering a little in 2020. The regional picture will be diverse with London and the South East weaker than the overall picture partly due to the disproportionate impact of higher mortgage interest rates.

Higher interest rates, weak transaction activity levels, squeezed real incomes and a somewhat uncertain medium term outlook will all act as a drag on the market. The gross mortgage market looks set to be around £265 billion in 2018 around 3% up on the £257 billion achieved in 2017. The composition of the market has shifted significantly but the total volumes remain lacklustre.
We expect total gross lending to ease to around £252 billion in 2019 and 2020. Net mortgage lending looks likely to fall sharply in 2019 as the rate of repayment continues to accelerate. In 2017 repayments of principal were running at 16.2% of the outstanding stock of mortgages and this appears to have risen to nearer 16.5%. We expect net mortgage lending to be around £40 billion in 2018 and less than £30 billion in 2019 and 2020.

Risks and issues 
We face a very uncertain six months or so as we navigate our way out of the EU and cope with the big upheavals in the world economy. It would be easy to fall into the trap of becoming too gloomy and ignore the underlying resilience of the UK economy. 2019 does not look like being a good year for the housing and mortgage market but the medium term prospects are far from negative.

Lenders need to be prepared for the risk of higher interest rates than widely expected and for more competition in the retail funding markets as the cycle progresses. The mortgage market is likely to look fragile in 2019 but if we can cope with the political and economic events of this year we can respond to most economic shocks. However, Mark Carney may well wish he had taken an earlier exit from the Bank of England rather than extending his pain into early 2020.

Source: Mortgage Finance Gazette

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Mortgage market performs well in summer months

There were 66,543 mortgages approved during August (seasonally adjusted), 2.7% higher month-on-month, showing the mortgage market performed well in the summer months, the latest Mortgage Monitor from e.surv has found.

However this down 0.7% compared to August 2017.  The Bank of England made the historic step of raising the base rate to 0.75%, its highest level since 2009, on August 2.

This may also have prompted increased levels of activity this month, as borrowers try to lock in a low fixed rate deal while borrowing is still relatively cheap.

Richard Sexton, director at e.surv, said: “While many Brits were spending their time in the garden and at the beach, others were finding their dream home this month.

“August is traditionally a quiet month for the UK’s housing market but activity remained strong this year.

“Borrowers were racing to remortgage and seal a competitive mortgage, prompted by the rise in the Bank of England base rate.

“Strong activity should continue into September and October as homeowners receive their new, higher mortgage bills and look to switch.”

The proportion of mortgages approved to borrowers with small deposits, including many first-time buyers, increased between July and August.

This month 22.8% of all loans went to this part of the market, higher than the 22.1% recorded a month ago.

Large deposit borrowers, defined by this survey as having a deposit of 60% or more, saw their market share fall from 33.8% to 32.5% between July and August.

In the same timeframe, small deposit borrowers saw their market share increase from 22.1% to 22.8%. There was a similar increase in the proportion of midmarket borrowers, with 44.7% of all approvals going to this segment of the market compared to 44.1% in July

Thanks to their increased market share, the number of small deposits borrowers was 15,172, compared to 14,716 a month ago.

Sexton added: “There was a small shift toward small deposit borrowers this month, but the number of large deposit borrowers continued to outstrip this market segment.

“All types of borrowers, regardless of deposit size, are being tempted into the market by historically low mortgage rates and favourable criteria at mortgage lenders.”

While those with larger deposits tend to have an easier time accessing finance in the UK mortgage market, these borrowers have a different experience depending on where in the country they are looking to buy.

London continued to be the market which is most dominated by large deposit buyers.

Some 41.5% of all loans in the capital went to this part of the market, although this was slightly down on the 42.1% recorded a month ago.

The South East also saw a high proportion of these borrowers, at 38.8%. At the other end of the scale, Yorkshire had the lowest proportion of small deposit borrowers in August. Just 23.9% of all loans went to this part of the market this month.

Yorkshire was one of just two regions where more loans went to small deposit borrowers than their large deposit counterparts. Yorkshire saw 30.9% of approvals go to small deposit borrowers, versus the aforementioned 23.9% for larger borrowers.

In the North West small deposit borrowers accounted for 29.7% compared to 25.5% for the rival market segment.

Sexton said: “Having a large deposit usually gives borrowers access to the cheapest mortgage rates, but there are still equally good opportunities for those with less cash to splash.

“While small deposit borrowers, such as first-time buyers, may find it difficult in markets such as London, northern regions and Northern Ireland have a host of great opportunities for these borrowers.

“Even in the capital, prices are declining gently following a prolonged period of rises, meaning salaries can play catch up and borrowers can find their ideal home.”

Source: Mortgage Introducer

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UK mortgage approvals rise to highest since September

The British mortgage market showed some signs of stabilising in June as the number of mortgage approvals rose to its highest since September, according to data published today.

British banks approved lending for 40,541 house purchases during the month, above expectations of around 39,100, the latest seasonally adjusted figures from industry body UK Finance show.

The value of approved loans for house purchases rose to above £8bn for the first time since February.

However, the figures continue to show weakness in demand for borrowing, with the number of approvals still 2.1 per cent lower than June last year. Economists and industry figures have warned that the outlook for the housing market is clouded by political uncertainty as the UK leaves the EU, while an imminent interest rate rise will test Britons’ appetite for more expensive debt for only the second time in a decade.

Lenders have been sustained in part by a strong demand for remortgaging, as borrowers rush to lock in low rates before the Bank of England raises the cost of borrowing further. The Bank is widely expected to increase bank rate, at which it lends to banks, by 0.25 percentage points next week.

The 3.4 per cent year-on-year increase in remortgaging has made up for a 4.7 per cent reduction in house purchase lending in June compared to the same month last year. Mortgage approvals for remortgaging fell slightly in June compared to May, although at 29,354 remained the second strongest performance since September.

Across the entire mortgage market gross lending has risen 2.1 per cent year-on-year to £23.5bn, driven by specialist lenders. High street bank mortgage lending has fallen by 2.9 per cent during the same period.

Source: City A.M.

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Completed remortgages up 7.1% year-on-year

The mortgage market has seen a pre-summer boost as there were 36,000 new homeowner remortgages completed in the month, some 7.1% more year-on-year, UK Finance’s Mortgage Trends Update has found.

The £6.3bn of remortgaging in the month was 6.8% more year-on-year. There were 32,200 new first-time buyer mortgages completed in the month, some 8.1% more than in the same month a year earlier.

The £5.4bn of new lending in the month was 12.5% more year-on-year and the average first-time buyer is 30 and has a gross household income of £42,000.

Steve Seal, director of sales and marketing, Bluestone Mortgages, said: “Whilst it’s good to see continued first-time buyer activity, these results do not reflect the growing pool of borrowers who struggle to access funding.

“Contractors, entrepreneurs or self-employed workers with complex financial backgrounds usually struggle to meet the vanilla criteria of high-street lenders – even if they have a reliable history of repayments.

“The specialist lending market has a significant role to play in closing this funding gap; providing a service that understands an individual’s circumstances and supporting borrowers in their homeownership aspirations.”

There were 31,100 new homemover mortgages completed in the month, some 4.4% more than in the same month a year earlier.

The £6.6bn of new lending in the month was 4.8% more year-on-year and the average homemover is 39 and has a gross household income of £55,000.

There were 5,500 new buy-to-let home purchase mortgages completed in the month, some 9.8% fewer than in the same month a year earlier. By value this was £0.7bn of lending in the month, 22.2% down year-on-year.

There were 14,600 new buy-to-let remortgages completed in the month, some 15% more than in the same month a year earlier. By value this was £2.3bn of lending in the month, 21.1% more year-on-year.

Matt Andrews, managing director of mortgages at Masthaven, said: “Growing first-time buyer figures represent a huge bright spot in mortgage lending, with figures even outstripping homemovers.

“Likely to be attracted by good rates, the various government backed schemes and the emergence of challenger banks and specialist lenders who provide alterative options to the big high street names, the choice for first-time buyers has never been so good.

“As expected, remortgaging continues to rise, largely due to the anticipated Bank of England rate rise.

“While uncertainty remains around timescales, brokers need to see this as an opportunity to reengage with their back-books.

“The same opportunity can be seen in the buy-to-let space – much work needs to be done here to attract new and veteran landlords, with specialist lenders leading the way in providing flexible and innovative products.”

Jackie Bennett, director of mortgages at UK Finance, said: “The mortgage market is seeing a pre-summer boost, driven by a rise in the number of first-time buyers and strong remortgaging activity.

“It is also particularly encouraging to see an increase in homemovers, after a period of relative sluggishness in this important segment of the market.

“However, affordability remains a challenge for some prospective buyers and this is reflected by a gradual increase in loan to income multiples.

“Meanwhile purchases in the buy-to-let market continue to be constrained by recent regulatory and tax changes, the full impact of which have yet to be fully felt.”

Source: Mortgage Introducer

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Risky mortgages soar with gentrified Croydon leading the way

The number of people taking out risky mortgages jumped by 15 per cent last year, with Croydon becoming the UK’s number one hotspot for high-risk mortgage lending.

Banks approved 101,380 mortgages in 2017, and the south London town of Croydon had 463 high-risk mortgages taken out, rising 11 per cent on the year before despite the UK average being just 39 risky mortgages per area.

According to Bank of England guidance, mortgages are considered “high-risk” if they are lent at 4.5 times or more of the applicant’s salary.

Along with Croydown there were a number of London areas with a high volume of risky mortgages, with Walthamstow (421), Wandsworth (363) and Streatham (322) all following close behind.

Top 10 areas for risky mortgages in the UK
1. Croydon – 463

2. Walthamstow – 421

3. Wandsworth – 363

4. Streatham – 322

5. Tooting – 319

6. Brighton – 313

7. Hove – 296

8. Battersea – 296

9. Farnborough – 294

10. Wimbledon – 276

The number of high-risk mortgages in Croydon “reflects the turnaround in its reputation”, according to peer-to-peer lending platform Lendy, which carried out the findings.

With the recently-opened Croydon’s Boxpark and the upcoming Westfield Shopping Centre due to begin construction in a year’s time, Croydon has undergone significant redevelopment and gentrification.

Liam Brooke, chief executive of Lendy, said: “More and more people are stretching their budgets to live in Croydon. Unexpectedly it has become one of the country’s property hotspots.”

Source: City A.M.

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Mini-revival for mortgage market as home purchase approvals increase for first time in two months

The mortgage market staged a slight comeback in May with approvals for both home purchase and remortgages increasing, Bank of England data shows.

Both types of lending had experienced falls in April.

Approvals for new home loans increased by 2.5% to 64,526, above the previous six-month average of 63,803. It is the first time approvals for home purchase have increased in two months.

However, remortgages continue to drive the market. Approvals were up 7.7% to 50,979, taking them above the previous six-month average of 48,494.

Commenting on the figures, Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “People who need to move or sell are getting on and doing it, whether that be because of death, divorce or a job move.

“The slowdown in the market is down to the lack of discretionary movers – they are more likely to sit on their hands and delay making a decision hoping for better value in the future.

“Of course, it is all relative. If you are selling and buying, any price movements will affect you both ways, but if you have sold, are renting and waiting, then the wait continues.

“Interest rates are not likely to move in the short term at least, and the mortgage market remains ultra-competitive with lenders vying for market share.”

Source: Property Industry Eye

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Data rules could force lenders to change mortgage criteria

The General Data Protection Regulation (GDPR), which has given consumers the right to challenge automated decisions made by banks, could force lenders to change certain lending criteria.

The data rules, which took effect on 25 May, mean people turned down for a mortgage, credit card or loan because a ‘computer said no’ can challenge their bank’s decision and demand it should be reviewed by a human.

Ray Boulger, senior technical manager at John Charcoal, believes there could be some long-term benefits in the data rule change.

He said the problem in the past was a lender did not have to give any specific reason for rejecting an application, they could simply refer the client to the credit agency they worked with, whereas now they have to justify and explain their decisions.

Criteria around County Court judgements for instance, which can be handed down for small debt-related offences such as unpaid utility bills, and could trigger a rejection, may be reviewed, he said.

He said: “There is a difference between [an applicant] who is not aware of a CCJ and somebody where it is a conspiracy but some lenders’ criteria doesn’t really differentiate between that.

“In the short term lenders may be choosing to do nothing and take a wait and see approach but this is an area that gives borrowers more ammunition and if enough borrowers take action lenders may feel uncomfortable about rejecting an application based on certain criteria, and they might well choose to change their criteria.”

The General Data Protection Regulation (GDPR) does not prevent banks from using automated processes but it requires firms to alert their customers to such processes and have appropriate services in place for them to appeal.

David Hollingworth, associate director of communications at L&C Mortgages, said the prominence of lender privacy policies may help give customers more clarity around their right to challenge automated decisions.

But he said it was yet unclear whether challenges would lead to lenders undertaking an individual underwriting process.

He said: “In many cases though this is unlikely to make for a significant change in the way that borrowers make their applications.

“Automation clearly has some benefits in speeding up processes and borrowers are still likely to accept that automated decisions are part of the process.”

Where he thought the new rules could help was to uncover a situation where the application failed simply because data was input incorrectly.

Santander and HSBC told FTAdviser they used automated processing but would be happy to review their decision when challenged in line with the General Data Protection Regulation (GDPR).

Liz Syms, chief executive of Connect Mortgages, did not think the General Data Protection Regulation (GDPR) would make much of a difference to the big lenders’ processes.

She said clients already had the right to review their submitted data or appeal a lender’s decision before the General Data Protection Regulation (GDPR).

She said: “GDPR, I believe, is more about formalising the rights to appeal and also the rectification of data error in these circumstances.

“If there are no data errors however, it does not oblige the lender to change their decision just because the automated decision has been challenged.”

Source: FT Adviser

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Mixed picture for mortgage lending as concerns triggered over arrears and possessions

The Bank of England has shone a rather gloomy light on the state of the mortgage market in the first three months of the year, revealing that the value of committed mortgage lending has hit its lowest level since the third quarter of 2016.

Separate data suggests that the number of borrowers in arrears is rising.

The Bank’s England’s Mortgage Lenders and Administrators Statistics shows the value of new commitments for home loans was £61.1bn in the first quarter of 2018, down 5.9% from the end of last year.

The total amount already lent in the first quarter of 2018 is still up 3.3% annually at £62.4bn, but this was down 9.6% on the fourth quarter of 2017.

The buy-to-let sector showed growth, with 14.1% of new loans.

The share of loans to first-time buyers decreased 1.6 percentage points to 19.6%, while remortgaging saw a 3.2 percentage point jump to 32.9%.

The proportion of mortgages in arrears also hit record lows, down 1.06% to £14.8bn.

But Mark Pilling, managing director at Spicerhaart Corporate Sales, warned that the number of loans in serious arrears – above 10% – has been increasing over the past two years.

The latest UK Finance data showed the number of mortgages with arrears of 10% or more was up 10% annually in the first quarter of 2018 to 1,100.

Pilling said: “While overall, the percentage of loan balances in arrears – and the number of cases in arrears as a percentage of the total number of loans – are both steadily dropping, the number loans in arrears of 10% or more is actually rising.

“There are double the number of cases in significant arrears than there were a decade ago.

“While the number of new possessions has been dropping too, they rose in the first quarter of 2018 by 5.78%.

“These figures could suggest arrears are starting to rise again as borrowers face increased economic pressures. The recent job losses in the retail sector could cause further payment shocks for both owner-occupiers and also buy-to-let borrowers in the coming months.”

Separately, surveyors have a slightly more positive outlook, estimating that first-time buyers saw their share of mortgage lending increase during May.

The e.surv May Mortgage Monitor found that surveyors predicted a total of 66,479 mortgages were approved last month, 6.4% higher than April’s figure.

The share of first-time buyer mortgages increased from 20.2% in April to 22.4% May, surveyors predict.

Large deposit borrowers – defined by those with mortgages of 60% loan-to-value (LTV) – saw their share of lending drop from 33.2% to 32.8% between April and May.

Mid-market borrowers – those with mortgages of 75% LTV – also saw their share of the market drop, falling from 46.6% in April to 44.8% last month.

Richard Sexton, director at e.surv, said: “We have seen a sharp increase in the number of small deposit borrowers this month, which will be a big confidence boost to others looking to get on the ladder soon.

“This is the second successive month we have seen a large rise, suggesting now is a great time if you have a small deposit.”

Source: Property Industry Eye