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Mortgage lending rose by 7.6% in July

Gross mortgage lending rose by 7.6% to £24.6bn in July 2018 year-on-year ahead of August’s base rate rise, UK Finance figures show.

Mortgage approvals by the main high street banks fell by 0.8% year-on-year, though remortgage approvals rose by 2.8%.

Peter Tyler, director at UK Finance, said: “July saw steady growth in gross mortgage lending, driven largely by remortgaging as homeowners locked into attractive deals in anticipation of the recent base rate rise.”

Jeff Knight (pictured), marketing director for Foundation Home Loans, agreed that the rate rise was behind the increase.

He said: “The anticipation of a rate rise certainly would have encouraged a spike in activity, and while the purchase market is still less inflated – particularly for first-time buyers – it’s remortaging activity that is helping to maintain momentum and overall growth.

“This is certainly the case in buy-to-let as landlords choose to maintain the size of their portfolios, waiting for a more opportune time to build on it.”

Some expect the remortgage market to continue its strong activity in the coming months.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Lenders remain keen to lend and offer competitive products, particularly in the remortgage space.

“With other incentives such as cash back increasingly being offered to those remortgaging, combined with fears of further potential rate rises, we expect this area of the market to remain particularly strong in coming months.”

However some disagree.

Richard Pike, sales and marketing director at Phoebus Software, said: “The market has been propped up recently by the continuous buoyancy in remortgaging but, with few people now left on variable or tracker rates, this too is likely to slow.

“As we approach the deadline for Brexit even the threat of a no deal is likely to weigh heavy across our economy, how that will manifest itself in the housing market is difficult to predict, but it could bring along a period of stagnancy while people wait to see what happens.”

Source: Mortgage Introducer

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Second charge volumes up 8% in April – but they ‘should be higher’

There were 1,771 new second charge mortgages issued in April 2018, an increase of 8% year-on-year – but London Money director Scott Thorpe reckons “they are a long way off where they should be”.

The Finance and Leasing Association found that in the 12 months leading up to April, there was a rise of 9% in new agreements from that last year.

The value of new business was £83m in April, up by 2% year-on-year,though lending reached was £1.025bn in the 12 months leading up to April, a rise of 11% from that last year.

But Thorpe said: “I actually think these figures should be a lot higher The market should have expanded greater and faster since MCD than it has.

“The reason why that hasn’t happened is down to the same old barriers – high fees and brokers being able to access to lenders directly. Both these issues are stopping the market growing.

“What we are seeing is a gradual upturn in second charge lending. The numbers are a long way away from where they should be but all forward progress is good progress.”

He added: “I really think the industry should be concentrating on making sure the consumer is given the best advice regardless of the secured options.

“We need to see the end of advisers and packagers being able to opt out offering full advice. Do that, curb fees and open up distribution and we will be talking about double digit growth for the sector for many years to come.”

Fiona Hoyle, head of consumer and mortgage finance at the Finance & Leasing Association (FLA), said: “The second charge mortgage market reported new business growth of 2% by value and 8% by volume in April, compared with the same period in 2017.

“In the three months to April 2018, the number of new second charge mortgages was 5,339, unchanged on the same period in 2017. This versatile product continues to prove popular with customers.”

Source: Mortgage Introducer

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Second charge lending falls

Second charge mortgage performed poorly in March, falling by 10% year-on-year with £86m of lending.

There was £1,023m of second charge lending in the 12 months leading up to March, an increase of 15% from that of the previous year.

Figures from the Finance & Leasing Association (FLA) also found there was £244m second charge mortgages in the three months leading up to March, with no percentage change year-on-year.

Tim Wheeldon, chief operating officer at Fluent for Advisers, said: “I don’t think some of the headlines I have read so far, highlighting the monthly fall in volumes, is the real story here.

“One month’s figures are not representative of a trend and while the month-on-month comparison shows a drop, the first quarter shows that the sector is ahead of last year’s figures.

“Our own experience at Fluent is that over the same period, we are registering record months with increasing volumes from our intermediary business.”

Source: Mortgage Introducer

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Portfolio landlords find it harder to secure mortgage finance post PRA rules

Seven out of ten portfolio landlords have found it more difficult to secure a mortgage since changes were introduced by the Prudential Regulatory Authority (PRA).

According to figures from Foundation Home Loans, based on research by BDRC Continental, 70% of UK landlords with four or more buy-to-let mortgages said they had found obtaining finance a challenge since the regulation came into effect on 30 September 2017. Half (51%) owning between one and three buy-to-let mortgages felt the same.

All the figures are based on feedback from 817 landlords that have applied for a mortgage or remortgage since the changes came into effect.

The PRA regulation means lenders must introduce changes to the way in which buy-to-let mortgage applications are underwritten for portfolio landlords. Borrowers with four or more mortgaged properties will be classified as portfolio landlords and subject to the new standards, such as a requirement to submit a forward-looking business plan.

As a result, almost half (48%) of landlords aware of the PRA changes think they will slow down the process of securing a mortgage.

Two thirds of those who own 11 or more properties believe the range of mortgage products available to them will be reduced. Furthermore, 28% believe the changes will make it more likely for their mortgage application to be rejected.

Jeff Knight, marketing director at Foundation Home Loans, said“Whether these figures are to do with a natural period of adjustment or become the new norm remains to be seen. Nonetheless, in order to make this as smooth a transition as possible, brokers and lenders must work together to ensure things do not become unnecessarily challenging.

“Our research last year proved that, at the end of the day, brokers and landlords are after pragmatic and straight forward processes. Considering the significant take-up from this group, we devised a proposition to make application as simple as possible – for example, with no need for evidence of a business plan.”

Source: Mortgage Finance Gazette

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First time landlords’ appetite for property proves buy-to-let remains popular

Seven percent of a mortgage lender’s new business in 2017 came from first time landlords – despite regulatory and tax changes that may have acted as a deterrent.

The stream of new landlords peaked in November when 11 per cent of the lender’s applications came from first timers, says buy-to-let lender Accord Mortgages.

The figures are proof that buy-to-let remains a popular option for people who are looking to safeguard their financial future, despite recent moves from government to suppress the market.

And 57 per cent of Accord’s buy-to-let applications received last year were from landlords affected by new changes, with one third (32 per cent) of that cohort, coming from those with four or more properties.

Another 18 per cent were from landlords classed as consumers – that is, single property landlords where they or their relatives have previously lived.

Chris Maggs, commercial manager at Accord, said: “2017 was a year of remortgaging for landlords who reaped the benefit of some exceptional mortgage rates, and 2018 is likely to be no different.

“Last year Accord, like many other lenders, adapted its mortgage offerings to meet the changing needs of the market.

“Equally, as new regulation was implemented landlords have begun to adapt to ensure their business withstands the changes.

“This doesn’t negate the fact that things are still tough for landlords, and hopefully 2018 will give them some breathing space to take stock of the changes.

“However, landlords have demonstrated resilience when presented with challenges in the past, and I’m sure that will continue into 2018.”

Source: Simple Landlords Insurance

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Challenges to buy to let market means rents set to increase only modestly in 2018

Private sector rents in the UK are set to increase modestly in 2018, hindered by policy changes over recent years, according to the latest lettings market forecast.

Supply across the private lettings market seems likely to face significant headwinds going forward as the 3% stamp duty surcharge on buy to let sales has knocked investor demand substantially.

The forecast report from the Royal Institution of Chartered Surveyors (RICS) points out that during the year leading up to its introduction, the number of buy to let mortgages being advanced averaged 10,000 per month while over the following 18 months, the number of buy to let mortgage approvals has averaged just 6000.

The challenges do not stop there however, it also points out. The withdrawal of mortgage interest tax relief, coming in stages up until 2021/2022, it says, will further reduce the appeal of buy to let as an investment.

The RICS housing market survey was used back in August to gauge perceptions on the net change in the number of landlords in light of the less favourable policy backdrop. Quite emphatically 83% of respondents felt there would be more landlords exiting, rather than entering, the market over the coming 12 months.

The picture is pretty similar at the three year horizon, with 76% of contributors feeling there would be greater numbers of landlords exiting the market and RTCS says that given buy to let accounts for around 95% of the private lettings sector, it’s difficult to see Build to Rent developers fully plugging this gap. ‘Consequently, this does not bode well for rental affordability going forward,’ the report points out.

It also says that there are already growing signs that affordability constraints are taking their toll on demand. Indeed, across the UK as a whole, tenant demand stagnated in the three months to October and the net balance of just +1% was the softest quarterly reading since 1999.

Nevertheless, alongside this, landlord instructions have declined in each of the last three quarters, meaning that even with the flat demand backdrop, fresh supply in net balance terms is falling short.

Consequently, rental growth expectations remain in positive territory but the forecast is pointing to a further moderation in the pace of rental gains towards 1%, from 1.6% at the moment.

In London, the near term rental growth expectations series is signalling a flat to marginally negative outlook for 2018 which comes on the back of fairly sustained period over which demand has been weakening in the

‘Feedback tells us there is a mismatch between landlords’ desired rental levels and tenants ability to pay, with the resulting reduction in activity meaning supply in the London lettings market is not being absorbed by demand for the time being,’ the report explains.

‘The longer term view on rents, both at the national level and across London, is that growth will strengthen to average a respective 3% and 2% per annum over the next five years. Critically, these projections outstrip those for prices over the same period, adding further weight to the idea that supply pressures could be even more acute across the lettings market,’ it concludes.

Source: Property Wire

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What will happen to house prices in 2018? Here’s what the experts think

It has been a difficult year for the UK’s property market, with the effects of a raft of new rules introduced over the past couple of years continuing to take their toll on house prices.

Yep: this year homeowners and landlords have been forced to grapple with the after-effects of regulations forcing landlords to shoulder the burden of costs when signing up new tenants, hiking stamp duty on top-end properties and slashing relief on mortgage interest repayments.

What about next year? Here’s what the experts think.

1. House prices will grow

Confidence in UK property has fallen to a five-year low, according to figures by Halifax – but the good news is that experts are predicting house prices will grow, albeit at a fairly modest rate compared with what we have become used to. Both JLL and Savills are reckoning on a one per cent rise in UK house prices next year, according to their forecasts.

2. But London will be the biggest let-down

Having outstripped the rest of the UK by a country mile in the immediate aftermath of the downturn, house price growth in the capital will level out for the next couple of years, experts say. Savills predicts a two per cent fall in 2018, followed by flat growth in 2019, while JLL predicts flat growth in 2018, followed by a 0.5 per cent rise in 2019.

3. Actually, it’s more of a tale of two cities

Ok, so everyone can agree prices in the capital will fall next year. But not everywhere in the capital will suffer: a forecast by KPMG has found in the next three years, prices in Hackney will rise more than five per cent. Westminster follows, with growth of 4.3 per cent, and Lewisham, where prices are expected to rise 4.1 per cent. At the bottom of the ranking is Richmond, where prices will rise just 1.7 per cent in the three years to 2020.

4. Expect more discounting

Data by Rightmove has shown more than a third of homes listed on its portal have had their prices cut, the highest proportion of discounted properties on sale in the autumn in five years. But it has suggested that doesn’t go far enough – saying that sellers are being “too optimistic” with their reductions, and should consider something more dramatic.

5. Beware a hard Brexit

Forecasts are all well and good when you know what’s ahead, but the market faces unusually high threat levels, even by recent standards. In its UK Housing Market Forecast, Knight Frank said the biggest threat to the market was an unfavourable Brexit deal, or one which leaves the UK with prolonged uncertainty past 2019. “As well as wider economic implications, the lack of a deal could impact London’s status as a global financial centre,” it said.

Source: City A.M.

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How the interest rate rise will affect your mortgage

The Bank of England recently announced the first interest rate hike in ten years as it acted on its legal mandate to keep rising inflation in check. Base rates have steadily decreased since 2007 culminating in the historic low of 0.25 per cent following Brexit last year, but the decision to leave the EU has weakened the value of sterling, and despite the “no change” policy prevalent for so long, the BoE has finally decided to act. The rise means change for homeowners and their mortgages but what will be the real-world impact?

Modest rise for variable rate mortgages

Homeowners with a tracker rate or standard variable rate (SVR) mortgage will be most affected by the BoE’s decision. If you have a mortgage of £175,000, then you can expect to pay around £22 more each month; that increases to almost £50 a month for a £400,000 loan. Around half a million borrowers are currently on Nationwide’s popular base mortgage rate tracker so the uptick from 2.25 per cent to 2.5 per cent will increase a monthly bill to £785 for a £175,000 loan.

However, the mortgage landscape has changed dramatically in recent years, and while there are up to five million households with an SVR mortgage, these loans tend to be older and have smaller outstanding balances. The market is now skewed towards fixed-rate mortgages so fewer homeowners will find themselves out of pocket in the short term.

The chief economist at Resolution Foundation Matt Whittaker stated: “The big changes that have taken place in our housing market over the last decade mean that barely one in ten families are at risk of seeing the overnight effect of today’s interest rate decision through higher mortgage costs.” The independent think tank believes just 11 per cent will be immediately affected, which is down significantly on the 19 per cent that would have felt the pinch a decade ago. That is due in part to a decline in homeownership and the rise in SVR.

Fixed rate mortgages remain static for now

Homeowners with a fixed-rate mortgage will not be affected by the interest rate rise in the short term. More than half of mortgage loans in the UK are fixed-rate, but due to changes outlined earlier, a sizeable 94 per cent of all new mortgages are now on these deals. That means the majority of borrowers won’t have to worry about an uptick in repayments for now.

However, fixed-rate mortgages typically run for two or five years so you may face the prospect of higher monthly repayments after the end of the current term. You should also be wary of “payment shock” during this period as a failure to remortgage could mean that you continue with the standard variable rate offered by your lender. Santander has already stated that its SVR is set to increase to 4.74 per cent from 4.49 per cent.

Buy-to-let mortgages increase

Buy-to-let mortgages are slightly different as interest only is the most common repayment option. Base rate rises, therefore, have a more significant impact on landlords as they are forced down an alternative path compared to conventional buyers. The quarter percentage rise on a £200,000 loan would only increase monthly payments by £25 for the latter, but if you have a buy-to-let deal for a property in London, you can now expect to pay £40 extra a month.

Long-term outlook

BoE governor Mark Carney has stated on several occasions that interest rates are likely to increase at a slow and steady pace in the future. While the current hike appears small, the cumulative impact of several rises could be more damaging, though it is unlikely to be disastrous for most households. For example, a two quarter-point rise will increase monthly payments by £38.61 to £718.36 for a £150,000 mortgage, while a one per cent rise from the new rate would increase payments by £78.48 to £758.20.

Borrowers generally should be able to absorb the costs because after the fallout from the major crash ten years ago the Financial Conduct Authority now enforces new regulations to ensure lenders only lend to people capable of coping with rate increases. Those new rules will now be tested thoroughly for the first time.

Pay off mortgage early

The interest rise is a great incentive for reappraising the terms and details of your mortgage to determine whether it would be a worthwhile investment to pay it off early. Most mortgages allow you to make “overpayments” each year without any charge to cut the time it takes to pay it off completely. Taking a closer look at your mortgage paperwork will also flag up any irregularities regarding PPI. The payment protection insurance (PPI) scheme was widespread during the 1990s and 2000s, and you may discover that you paid for insurance without your consent. You can use a PPI Calculator to find out how much you may be owed in compensation.

Conclusion

The interest rate rise is big news, but the impact is minimal for the time being as tracker rates rise by a modest sum and fixed-rate mortgage holders adopt a wait and see approach. House prices are not expected to increase either. The real test will be when the BoE rolls out “slow and gradual” base rate rises because those increases could eventually cause significant problems for borrowers. Everyone should, therefore, be vigilant and reappraise their financial position in the coming months.

Source: London Loves Business

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Rise of 115% in numbers applying for a short-term loan to pay their mortgage of rent

THE number of people in the UK turning to a short-term loan to cover their rent or mortgage has more than doubled, according to new statistics.

In the past two years the number of people applying for short-term loan who said they needed help paying for their accommodation increased by 115 per cent.

New data from FCA authorised credit broker CashLady found the total number of people applying for loans has also nearly doubled since 2015, with a 93 per cent increase in volume.

As well as the number of loan applications rising, the average loan amount requested by those struggling in the UK has increased by 45 per cent from £224 in 2015 to £325 this year. The statistics from CashLady come just weeks after the Financial Conduct Authority revealed that one in six people in the UK (17 per cent) would struggle to pay their mortgage or rent if it increased by just £50.

Earlier this month, the Bank of England’s Monetary Policy Committee announced it would increase interest rates for the first time in ten years — from 0.25 per cent to 0.5 per cent.

Figures also revealed that NHS workers still top the list of employees who most require emergency financial help.

They are followed by supermarket staff from Tesco, Asda and Sainsbury’s. Struggling members of the armed forces also make up the top five workforces requesting loans.

Managing director of CashLady, Chris Hackett, said being able to keep a roof over your head is “a basic human right.”

He added: “These figures, uncomfortable as they are, lay bare the state of the nation as people are struggling to cover their rent or mortgage payments.

“Wages for some of our most valuable members of society are just not high enough for them to manage basic living costs and they are regularly being forced to seek out short-term financial help.

“Housing expenditure is the largest monthly expense for our customers and they should be able to comfortably afford this before turning to emergency finance.

“We act as a broker for short term credit to help our customers find financial assistance from FCA authorised credit providers instead of seeking out illegal or potentially dangerous alternatives.”

The CashLady figures have been released after Chancellor Philip Hammond was accused of leaving ‘ordinary’ Brits out of yesterday’s budget, by failing to mention a wage boost for public sector workers, despite claiming to “support our key public services.”

Source: The National

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Rising inflation – should I fix my mortgage rate?

As interest rates rise, should you reassess your mortgage?

THE recent decision to increase the Bank of England base rate was indeed forecasted in this column some months back, and its lack of logic remains the same. Quite how mortgage borrowers are driving inflation because of spending is beyond me, or perhaps that’s not what they are aiming at!

As inflation tops 3 per cent, it appears well beyond the 2 per cent target of the BoE.

However, it is well documented, that as a net importer rather than exporter, a weakened currency, driven by a Brexit fiasco has created a sharp rise in import costs, which creates inflation through higher prices.

This has nothing to do with the borrower, who is now caught between the rock of inflation on the goods they buy, and the hard stone of higher rates.

A rise in interest rates would normally have made sterling increase in value (and have pushed down these inflationary pressures above) but the seemingly ‘marketed’ statement from the BoE that any rate increases would be gradual curbed that. Currency wars indeed.

The impact will merely be psychological as more than half of borrowers are on fixed rate mortgages. Furthermore, this puts further pressure on the economy, as the householder factors in higher rates, along with inflation, but falling incomes.

With businesses unsure about Brexit, increased costs of their imports and the potential for higher borrowing rates, they will be unlikely to want to increase wages.

When the BoE changes rates, there isn’t necessarily always a direct reaction upwards or downwards in mortgage costs from lenders, although we have seen future fixed rates creep up over the last few months.

When rates nosedived to 0.5 per cent, mortgages stayed at over 4 per cent, and very gradually have returned to just over 2 per cent on average. Since 2009, it has always been a 1.75 per cent gap yet it was never more than a 1 per cent gap in the preceding years to the crisis! So there is room to move.

Since 2011, more than half of new borrowers have used fixed rates (over 84 per cent of new loans for last year), so there will be much less impact on borrowers via rate increases and in turn, the ability to slow inflation.

However, the biggest risk comes to approximately half of the 4.2 million borrowers whose fixed rates come up for review this year or next, who may be faced with a shock jump.

Right now, as you see, logic doesn’t seem to matter, so it’s worth borrowers looking to protect their own budgeting ability.

Mortgage rates are at a historical low and many borrowers will have no idea what a 7 per cent mortgage rate looks like let alone 15 per cent. Borrowers acclimatised to low rates could easily be caught out.

The Brexit and current government fiasco will only put further downward pressure on sterling, which increases inflationary risks, which in turn increase the potential for further rate rises.

I’ve clarified the best mortgage rates available today with our mortgage department, and a new borrower with a £180,000 mortgage will pay £702.26 per month for a two year fixed rate, £753.34 for a five year fixed rate but £706.43 for a variable/tracker rate.

Those who couldn’t deal with rising rates will see that one small rate rise will have their variable rate above the two- and five-year fixed rates, so if budgeting is important, you should seek out the advice of an independent mortgage broker. Needless to say, the difference between the best rates and worst rates is also considerable.

Trying to calculate what mortgage rates may do is a scientific gamble, but gambling with your ability to pay your mortgage and your home and security, needs careful consideration.

A downside of fixed rates however, is the early repayment penalties. If you decide to move or have to sell, having a hefty early repayment penalty is a difficult pill, so be sure your broker limits this. They will have every mortgage rate at their finger tips and will be able to guide you through that minefield.

Source: Irish News