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Biggest mortgage lender increases rates on deals for new borrowers

The UK’s largest mortgage lender says it will increase rates on Wednesday as the cost of new fixed rate deals continues to climb.

The Halifax, part of Lloyds Banking Group, will put up the interest rates on a range of deals for new borrowers to well over 5%.

“On October 5, we’ll be updating the rates on our homebuyer mortgage range,” a spokesperson for the Halifax told STV News.

“We continue to have a range of fixed-rate product terms available up to 95% LTV (loan-to-value). The new rates reflect the continued increase in mortgage market pricing over recent weeks.”

The Halifax’s decision means its rate for a two-year fixed deal for a customer offering a 25% deposit is up from 4.61% to 5.84%.

A five-year fix with the same deposit will stand at 5.44% from Wednesday and a ten-year fix at 5.34%.

Many leading British banks are re-entering the mortgage market with interest rates of almost 6%, after halting new fixed-rate home loans last week.

Four days ago, the rate was 5.43% and at the start of December it was 2.34%.

Barclays, Skipton Building Society, NatWest, Virgin Money and Nationwide are among the lenders to increase their rates on new mortgage deals after chancellor Kwasi Kwarteng’s raft of tax cuts prompted concerns for the impact on inflation.

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1.8m fixed rates to end
Last month, the Halifax temporarily withdrew from the market all of its mortgage products that come with a fee amid continuing volatility surrounding the pound.

Several other lenders – including Virgin Money and Skipton – also pulled products from the market.

With mortgage rates generally on the rise, alongside other household bills, and many mortgage products having recently vanished from the market, more people may find it a struggle to keep up with their payments in the months ahead.

While the majority of mortgage holders are on fixed-rate deals, 1.8 million fixed deals are scheduled to end next year – meaning some homeowners could be in for a bill shock when they do eventually come to take out a new mortgage.

The interest rate on a new, average two-year fixed deal has risen consistently since Kwarteng’s mini-budget.

On the morning of the speech on Friday, September 23 it was 4.74%. Now, it is 5.97%. A five-year fixed deal has typically risen from 4.75% to 5.75% over the same period.

‘Weakest start to month’
October has seen the weakest start to the month for mortgage product choice in more than 12 years, according to financial information website Moneyfacts.co.uk.

Some 2,258 residential mortgage products were available on Saturday October 1, the lowest figure for the first day of a new month since May 2010 when 2,087 deals were available, it said.

Lenders pulled mortgage products from sale in large quantities last week amid market turmoil following the mini-budget.

On the first day of September this year, there had been 3,890 mortgage products for sale.

By Monday this week, there had been a slight improvement compared with Saturday, with 2,262 mortgage products to choose from.

Rachel Springall, a finance expert at Moneyfacts.co.uk said: “Borrowers may be concerned to see a further fall in mortgage availability, but many lenders have been very vocal that their withdrawals are on a temporary basis amid interest rate uncertainty.

“Seeking advice from an independent broker would be wise, especially for those borrowers who have not yet started the mortgage process and are deterred from the level of choice and much higher mortgage rates than they were perhaps anticipating.

“The next few weeks will be crucial to see where lenders go from here, but we have already seen some new fixed deals arrive since last week.”

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

Government pledges
Prime Minister Liz Truss said on Tuesday the UK Government will do “what we can” to support households over the coming months, amid growing concerns about the pressure rising interest rates will put on millions of people across the country.

She also insisted that her government would help households through the cost-of-living crisis, but also pointed to her and the Chancellor’s dash for growth as the antidote to some of the problems facing the country.

But Truss, who in recent days has been forced into two major U-turns amid backbench outcry over Kwarteng’s mini-budget, offered no specific reassurances for households who could be facing a steep rise in interest rates in the weeks and months to come.

Asked if the UK Government might be able to help struggling households, she acknowledged that people were “worried” about the cost of living and rising inflation, but once again said that interest rates were a decision for the Bank of England.

There is an expectation that the Bank of England could feel compelled to step in with another interest rate rise in the weeks to come, following the Chancellor’s mini-budget last month, in order to further calm the markets.

Such a move would only add further pressure to homeowners and those trying to buy a house.

Truss said: “We’re also doing what we can to help homeowners through stamp duty reductions [in England].

“The reality is, though, that interest rates are set by the independent Bank of England. They make those decisions on the basis of what’s happening with inflation and other factors.

“That’s why we have acted decisively on the energy price guarantee. We’re also doing what we can to help homeowners through stamp duty reductions. The reality is, though, that interest rates are set by the independent Bank of England.

“They make those decisions on the basis of what’s happening with inflation and other factors.”

By Kevin Scott

Source: STV News

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Bank of England to suspend market operations for State funeral

The BoE said CHAPS will be closed on 19th September, in line with its normal bank holiday arrangements.

CHAPS handled around 174,000 payments each day, in the year to February 2021, with an average payment value of £2.1m. That works out at around £367bn each working day.

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CHAPS is used by banks and large corporations to settle high-value money market and foreign exchange transactions, by companies to pay taxes, and by solicitors and conveyancers to settle property transactions.

The Bank’s Real Time Gross Settlement (RTGS) service, which underpins large transfers between bank accounts, will also be closed.

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Back in 2014, RTGS collapsed for most of a day, putting thousands of housing market transactions on hold.

Last week the BoE said the sale of corporate bonds held by the Asset Purchase Facility will be delayed by a week, to 26 September, following its decision to delay its next interest rate decision by a week (to 22nd September).

Source: London Loves Business

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Mortgage interest rates are signalling a return to lower inflation

Anybody who has been looking at mortgages recently may have noticed something surprising. If you want a two-year fixed-rate mortgage on a 60% loan-to-value, you could get 3.82% from First Direct, for example. However, if you want a five-year fix, you’d pay 3.58% at the same lender – ie, a lower rate. And if you’re going for a ten-year fix, the offer is 3.83% – only 0.01 percentage point more than the two-year.

I’m using First Direct here because it’s a clean example of the point – the terms across its mortgages are similar and there aren’t huge differences in early redemption charges or other nuances. But the same applies at many other lenders as well.

This is really not what you would expect. The basic principle behind a yield curve is that lenders expect higher rates for lending for a longer period. Occasionally yield curves on government bonds may be very flat or even invert slightly, but such a small difference between the five-year and ten-year rates on mortgages is uncommon. I reckon the gap of about 0.25 percentage points in the example is about one-third of what it’s been over the longer term.

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Pricing in a return to lower inflation
So what’s going on? You can see the answer pretty clearly if you look at what’s called the overnight index swap (OIS) forward curve, the data for which can be found on the Bank of England website. The OIS forward curve is essentially the forecast for what interest rates will be at a given point in the future. They are not the interest rate for lending for that long – they are simply what the rate is predicted to be at that point, implied from market pricing of interest-rate derivatives.

Thus the Bank of England OIS forward curve now suggests that interest rates will be at around 4.5% in the middle of next year. That’s a sharp rise from what it was implying just a month ago (around 2.5%-3%) and vastly up on expectations of around 1.5% six months ago. But the curve then predicts that rates will drop back sharply and will be around 3% by late 2025. That’s also up on forecasts from a month ago – when rates were expected to be 2% in 2025 – but has gone up by much less than expectations for rates next year.

That’s the explanation for why mortgage rates look so back-to-front: the market expects much lower long-term rates, and so loans for longer periods are pricing that in. This may happen – or it could suggest that markets are being too slow to recognise whether we are moving from a low-inflation/low-rate regime to one where both are at more historically normal levels.

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We won’t know for a while, but if markets are wrong, this will have huge consequences for the pricing of all sorts of assets. However, for anybody looking for long-term mortgage security, the gap between five-year and ten-year rates looks notably low – and might not last much longer if expectations change.

By Cris Sholto Heaton

Source: Money Week

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Fixed rates rise at record pace: Moneyfacts

As providers continue to revise and re-price their product ranges, the average overall two- and five-year rates have increased sharply this month, according to the latest data from Moneyfacts.

The latest Moneyfacts UK Mortgage Trends Treasury Report shows that both had experienced the largest month-on-month rises since 2007 when it started recording data.

The average overall two-year fixed rate has risen for a ninth consecutive month.

At 3.74%, the overall average two-year fixed rate has increased by 0.49% month-on-month.

Data found that it has increased by 1.40% compared to December last year (2.34%), the highest Moneyfacts has recorded since May 2013 when it stood at 3.80%.

At 3.89% the overall five-year fixed-rate average has also risen for nine successive months and is the highest on Moneyfacts’ records since November 2014 when it hit 3.93%.

Following the month-on-month rise of 0.52%, this rate is now 1.25% above the equivalent rate recorded in December last year when it reached 2.64%.

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The average two-year tracker rate has climbed to 2.74% after an increase of 0.20% compared to last month and is now the highest recorded since June 2014.

Since December last year, this average rate has risen by 1.16%, which is broadly in line with the 1.15% base rate that has gone up over this period.

The average Standard Variable Rate (SVR) has breached 5% for the first time in more than 13 years, after reaching 5.06%.

When compared to December 2021 (4.40%), prior to the first of the recent base rate rises, this has gone up by 0.66%.

However, at 5.06%, this is now the highest Moneyfacts has recorded since January 2009 when it was 5.14%.

Commenting on the latest figures, Moneyfacts finance expert Eleanor Williams says: “Product choice took another dip this month as mortgage lenders continue to revise their ranges in the face of ongoing economic uncertainty.”

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“We have seen some providers pull selected products, while others have withdrawn whole sectors of, or indeed their entire ranges, from the market temporarily. Compared to last month, total availability has reduced by a notable 431 deals to leave 4,556 mortgage products on offer to borrowers this month.”

“This is just 44 more deals than were available this time last year, although at just 23 days the product shelf-life is seven days shorter than the 30 days this stood at in July 2021, reflecting the current pace of provider updates.”

“As product ranges have condensed, average fixed rates have continued on an upwards trajectory, with two- and five-year fixed averages at all loan-to-value (LTV) tiers rising this month.”

“There are numerous factors which affect fixed rate pricing, rather than it simply tracking the Bank of England base rate. Providers take into account many influences, such as funding, swap rates, pricing pressures from other providers, and being able to maintain their service levels, among others.”

Speaking on SVRs, Williams adds: “Although the difference between this rate and the average fixed rates has reduced in recent months, for eligible borrowers about to fall onto a revert rate, the incentive to lock into a new fixed deal is still clear. Those switching from the average SVR to the current average two-year fixed rate might be able to make monthly savings of nearly £150.”

By Becky Bellamy

Source: Mortgage Finance Gazette

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More than 90% of lenders admit brokers bring benefits

The latest numbers from the Intermediary Mortgage Lenders Association (IMLA) showed more lenders recognizing the value brokers bring to mortgage applications.

Asked about the specific benefits speaking to advisers can bring to borrowers, 92% of lenders said it would help non-standard borrowers access a wider range of mortgage products, while 67% felt that borrowers who spoke to an adviser were likely to find a mortgage better suited to their needs.

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Adviser input could also speed up and strengthen applications. Nearly half (46%) of lenders suggested that those who made an application through an adviser were less likely to incur unnecessary delays throughout the process. More than half (58%) thought applications submitted by an adviser stood an overall greater chance of being approved.

The research also revealed lenders taking steps to maintain close working relationships with advisers since the start of the pandemic. Seventy-five per cent (75%) reported they have been working more closely with advisers to help them understand complex product criteria. In addition, 58% have invested in broker training and 54% plan to invest in technology to further support advisers.

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“Good relationships between brokers and lenders are not only key to ensuring that borrowers have access to a broad choice of mortgages to fit their needs, but also in reaching those non-standard borrowers who may have thought a property of their own was forever out of reach,” IMLA executive director Kate Davies said.

“Our research demonstrates that consumers tapping into the expertise of mortgage advisers will benefit from more choice, a better mortgage and a quicker application process that is more likely to be successful.”

By Mary Or

Source: Mortgage Introducer

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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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