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Brexit and mortgages: how to protect your mortgage against interest fluctuations

What is happening with Brexit and mortgages, and is there a way you can safeguard yourself against the unpredictable effects of Brexit on your repayments? Moreover, given the latest projections of further interest rates cuts by the Bank of England, should you be looking at remortgaging to find the best mortgage deal?

For first-time buyers and those who are coming to the end of their fixed-term period, the announcement that interest rates are likely to remain low will come as a relief – a sudden hike in interest rates resulting in more expensive mortgages is highly unlikely at least in the next year. People remortgaging now are still going to enjoy historically record low interest rates on their mortgage repayments. However, do bear in mind that the rules for remortgaging still mean that you would have to be able to make the repayments if the interest rates were to rise.

The longer term prognosis for what’s going to happen to interest rates remains far less certain. There are two main scenarios you need to bear in mind as a mortgage holder: one is an economic recession, while the other is a strong economic recovery (following, for example, a successful Brexit deal negotiation or the UK revoking Article 50).

If the former were to happen, say as a result of the UK crashing out of the EU without a coherent deal (still a possibility despite the current delay), the pound could take a hit. While this would again mean low interest rates to try and stimulate the economy, it could also mean a loss of jobs – which, of course, would render low interest rates meaningless to someone who is unemployed.

To safeguard your mortgage against this case scenario, it’s a good idea to: 1) reduce your debt; 2) increase your savings; 3) consider income protection insurance that would give you a safety net for your mortgage repayments in case you were to be out of work or have to take on lower paid work.

In the case of an orderly Brexit (or no Brexit – who knows?) and the UK economy regaining confidence, we can expect wage growth. When that happens, inflation rises, which leads interest rates to rise too. Hopefully, in this case scenario, your salary will increase in line with interest rate rises, making mortgage repayments manageable. However, having a decent savings pot for this case scenario is still a good idea – as is being prepared to downsize in case you live in a property with a large mortgage.

BY ANNA COTTRELL

Source: Real Homes

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Brexit and mortgages: what next for interest rates and repayments?

What’s next for Brexit and mortgages? Will mortgages become more expensive, and should you remortgage now?

What’s going to happen now with Brexit and mortgages, since the EU has agreed to grant Britain a three-month extension? How does this decision affect potential and current home owners, up to January and beyond? Will we see much of a fluctuation in the Bank of England’s base interest rate, and with it, cheaper or more expensive mortgages?

Martijn Van Der Heijden, Chief Strategy Officer at online mortgage brokerage Habito, comments on the implications of the Bank of England’s decision last month not to raise interest rates:

‘Interest rates remain relatively low which will be welcome news for those looking to get a good deal on their mortgage. This “wait and see” approach from the MPC (Monetary Policy Committee) is something we also see reflected in our own data with a surge in buyers choosing fixed deals for five years or more as they try to “Brexit-proof” their mortgage and lock in the same rate until 2024 and beyond.’

Basically, whether you are first-time buyer or remortgaging, now is the time to lock in a good fixed rate mortgage deal – if you don’t mind losing out somewhat in case the interest rates fall even lower than the current level. Why might that happen? It all depends on how the final Brexit deal is negotiated, and how smoothly it is executed. In the still possible event of Britain not securing a deal, the pound is likely to fall, and inflation will rise, which could lead the Bank to slash the interest rates even further. If this happens, and you are on a variable rate mortgage, you could see your repayments fall.

On the other hand, in the event of an orderly Brexit and a strengthening economy, interest rates could rise, which would be good news for your savings and wages, but not so good news for your variable rate mortgage repayments. A fixed rate deal would protect you from any significant interest rate spike, at least for a few years.

Which scenario is more likely? The truth is, nobody knows. We would say, though, that taking out a variable rate mortgage might not be worth the gamble under current uncertain circumstances – you could win a little, or lose big, so a good fixed rate deal will at least allow you to relax a little, for a while.

BY ANNA COTTRELL

Source: Real Homes

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Second charge mortgage market volumes rise by 12%

Second charge agreements were up 12% year-on-year in August, the latest figures from the Finance and Leasing Association have revealed.

There were 2,343 new second charge agreements in August.

The value of new second charge business saw a yearly increase of 10% at £102m.

Fiona Hoyle, acting director general and head of consumer and mortgage finance at the FLA, said: “The second charge mortgage market recorded its 12th consecutive month of double-digit new business growth in August.

“In the first eight months of 2019, new business volumes were 21% higher than in the same period in 2018.”

Richard Tugwell, intermediary relationship director at Together, added: “It’s clear that secured borrowing is growing in popularity.

“People are increasingly recognising it as a cost-effective way of securing funding for a range of needs, from house improvements to debt consolidation, while intermediaries recognise the importance of including a second charge option in their advice and recommendations.

“It is gaining more traction as an alternative to unsecured lending or re-mortgaging where factors such as redemption penalties, existing lender further borrowing policy and short term funding rates make these solutions less viable.”

Martin Stewart, director at The Money Group, commented: “ It is great news for a great product and some of the hard work being done by the industry to educate brokers about second charge mortgages.

“We have not necessarily seen an increase ourselves, our enquiries tend to arrive like buses and then it could be months before we see another one.

“One aspect that we should keep an eye on is whether second charge lenders are advancing because first charge lenders are retreating.

“We are without doubt entering a period of uncertainty and it will be interesting to see who has an appetite to continue lending.”

Robert Owen, managing director of mortgages and bridging at United Trust Bank, said: “It’s pleasing to see continued growth in the second charge marketplace as new products and technology has been brought into the market to improve the customer journey and the service to our brokers.”

Pete Mugleston, managing director at Online Mortgage Adviser, also commented: “We’ve seen an increase in enquiries and customers searching for alternative products to more traditional remortgages, with many homeowners opting to renovate and extend their property over moving and citing reasons such as increased cost (tax), the potential for further house price reduction (buying at the wrong time) and a lack of suitable property on the market to move to.

“It appears as though with the uncertainty around currently, whilst we’re still having record numbers of purchase enquiries, movers aren’t quite sure it’s the right time and more are deciding to stay put.”

Kevin Thomson, sales director at Connect for Intermediaries, believes more education is needed.

He said: “We always look for the best solution for the end client and often a remortgage can be better.

“We feel there is still a lot of education needed for mortgage brokers to really understand seconds and look at second charges and the variety of different purposes they can be used for.”

By Michael Lloyd

Source: Mortgage Introducer

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Mortgage approvals drop in August

Mortgage approvals for house purchase declined in August, the Bank of England’s Money and Credit statistics have found.

The number of approvals fell to 65,500 in August, in contrast to the 18-month high of 67,000 in July.

Andrew Montlake, managing director of Coreco, said: “Mortgage approvals for house purchase in August were down on July but held up fairly well once you factor in the seasonal drop-off.

“Three years of delay and indecision have created a phenomenal amount of pent-up demand and that saw house purchase mortgage approvals in August stay at the six-month average.

“Expect mortgage approvals in the Autumn and winter to be even more robust, as mortgage enquiries for home purchase really picked up in September.

“Despite a backdrop of political, economic and now constitutional chaos, the property and mortgage markets are ticking along quite well.

“There may be gridlock in Westminster but most Brits are now getting on with their lives.”

Whilst net mortgage borrowing by households dropped to £3.9bn in August, this followed a strong net flow of £4.5bn in July.

This was in line with the average seen since 2016.

The annual growth rate was unchanged at 3.2%, which is also in line with growth rates seen in the past three years.

Rob Barnard, sales director at Masthaven, added: “We have seen a downturn of lending in August, which may be in part led by the continued political uncertainty and the heightened chance of a no deal Brexit.

“However, despite the fall in net mortgage borrowing, the appetite for purchasing property has remained relatively strong keeping in line with the average seen since 2016.

“It seems that by and large, the market is not too concerned with the political turmoil of late. This is supported by our findings that in our Broker Beat research that found that 89% of brokers are confident about the prospects for their firm.

“The UK is still a desirable place to own a property and lenders are innovating to ease the application process for mortgages to deliver excellent customer service, paving the way for specialist banking to become the new norm.”

Vikki Jefferies, proposition director at PRIMIS, added: “Whilst mortgage lending for August was lower than July’s, mortgage advisers are continuing to do a great job of securing the right deals for borrowers – despite the political and economic uncertainty.”

Kevin Roberts, director at Legal & General Mortgage Club, remained optimistic.

Roberts said: “Wider political uncertainty is undoubtedly on the minds of consumers, but the mortgage market remains strong.

“Housing schemes like Help to Buy and innovation from lenders, such as family support mortgages are giving younger borrowers in particular more options to join the property ladder.

“Competition in the sector is rife and there are also some great deals available for those looking to buy or remortgage, especially if they speak to an adviser.

“These experts can give borrowers access to thousands more mortgages than if they went direct to a lender and 95% of consumers who used an adviser would likely recommend their family or friends do the same.”

Similarly, David Copland, director of mortgage services at TMA, added: “Whilst mortgage lending in August weakened, attractive deals, increased lender competition and the economic climate are incentivising people to act.

“Mortgage advisers are steering borrowers in the right direction and finding the best product for their circumstances.

“Remortgage business is a clear opportunity. Now is the time for advisers to be contacting any customers who are approaching the end of their term.”

Kate Davies, executive director of the Intermediary Mortgage Lenders Association, said that although mortgage lending remains consistent and stable in the face of ongoing political uncertainty, issues in the market still need to be solved.

She said: “Mortgage lending remains consistent and stable in the face of ongoing uncertainty in Westminster.

“Borrowers are still keen to press ahead with their plans to step onto or up the housing ladder and our research shows that advisers remain confident about the future of the mortgage market.

“However, there are still challenges facing the sector that must be addressed. As a priority, we need to replace the Help to Buy scheme, which has supported over 220,000 housing transactions since 2013.

“The market is already responding by providing more options for first-time buyers, such as higher loan-to-value mortgages, but it can still be hard for younger buyers to meet the stringent requirements of the current affordability rules.

“We need more dialogue between lenders, builders, regulators and the government to forge a coherent policy which supports responsible lending on good quality properties designed for younger buyers and those on lower incomes.”

By Michael Lloyd

Source: Mortgage Introducer

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New research sheds light on mortgage cashback

Stamp duty, home improvements or immediately starting to pay down their new mortgage are all ways homebuyers would spend cashback from lenders, Leeds Building Society has discovered.

The society carried out national research among 1,224 people into mortgage cashbacks to find out whether borrowers valued this option and how they would spend this cash.

There were four top priorities:

25% would use cashback to cover the costs of removals or storage
24% would pay legal or other professional fees
24% would put the money straight into overpaying their new mortgage
23% would cover maintenance or improvements they were expecting in their new home, such as a boiler service.

There was a difference in behaviour between residential purchasers and buy-to-let landlords.

A third of borrowers buying a residential property (32%) were most likely to settle professional services’ bills with their cashback, whereas 51% of buy-to-let purchasers favoured putting the cashback straight into overpaying their loan.

Matt Bartle, Leeds Building Society’s director of products, said: “Everyone’s requirements will be individual to them, which is why we offer different combinations of fees, features and incentives across our mortgage product range.

“For that reason we offer incentive packages which give borrowers plenty of choice, not only on the rate and term of their mortgage, but also to help with the other costs of moving home or remortgaging.

“Building on our market knowledge and long experience of mortgage lending, we continue to test ideas and ask borrowers what they need, so we can develop the product deals and lending criteria which will help more people to have the home they want.

“Of course, borrowers can choose how to spend their cashback and it’s positive to see that people would use the funds to cover costs associated with moving and in some cases overpay to reduce the size of a loan immediately.”

Leeds Building Society has a variety of no fee cashback mortgages available, including:

3.49% two year fixed rate shared ownership mortgage up to 90% borrower share with £500 cashback
2.49% five year fixed rate buy-to-let mortgage up to 60% loan-to-value with £1,000 cashback

By Joanne Atkin

Source: Mortgage Finance Gazette

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UK mortgage approvals hit two-year high in July as market stabilises – BoE

British lenders approved the greatest number of mortgages in two years during July, adding to signs the housing market has stabilised from its pre-Brexit slowdown, official data showed on Friday.

The Bank of England said lenders approved 67,306 mortgages, up from 66,506 in June and more than any economist predicted in a Reuters poll that had pointed to 66,167 approvals for July.

Britain’s housing market has sagged since the 2016 Brexit referendum – especially in London and neighbouring areas – but has shown signs of a tentative recovery in recent months.

Earlier on Friday mortgage lender Nationwide said house price growth in annual terms inched up to a three-month high in August, although remained weak by recent standards.

The BoE said net mortgage lending rose by 4.611 billion pounds in July, the biggest increase since March 2016, while consumer lending increased by 0.897 billion pounds compared with a forecast rise of 1.0 billion pounds on the month.

Lending to businesses fell by 4.218 billion pounds last month, the sharpest fall since August 2017. While the series is volatile, the severity of the fall could be another sign of nerves in British companies as the Brexit crisis escalates.

Earlier on Friday Lloyds Bank said business confidence fell in August to its lowest level since late 2011.

Source: UK Reuters

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UK Finance: Gross mortgage lending increases in July

Gross mortgage lending across the residential market and mortgage approvals both rose in July, UK Finance’s Household Finance Update has found.

Gross mortgage lending across the residential market in July 2019 was £26.1bn, 2.9% higher than the same month in 2018 and the highest since March 2016.

Mortgage approvals for home purchase were 16.4% higher, remortgage approvals were 19.4% higher and approvals for other secured borrowing were 12.7% higher than the same month a year earlier.

Andrew Montlake, managing director of mortgage broker, Coreco, said: “July was our biggest month of the year by a distance and on this evidence we weren’t alone.

“Remortgages were the driving force of the rampant activity levels in July, with households taking advantage of the exceptionally competitive mortgage rates available.

“Lenders are awash with cash and borrowers are making hay while the sun shines.

“First time buyer numbers are also surging, especially among those funded by the Bank of Mum and Dad.

“July was the month when the odds of a no-deal Brexit got a lot shorter and this clearly incentivised people to act.

“Borrowers have become increasingly worried that lenders could easily pull down the shutters in the event of a disorderly Brexit and also increase their rates so they’re getting on with it.

“Similarly, a lot of prospective buyers are wary that house prices could bounce back quite sharply if no-deal proves to be a damp squib and the balance of power swings back to sellers.

“Many people have come to the conclusion that there is as much risk to the wait-and-see approach to Brexit as just getting on with it.”

There were 95,126 mortgages approved by the main high street banks in July 2019, the highest monthly total since July 2009 when the figure stood at 99,970.

Richard Pike, Phoebus Software sales and marketing director, added: “These latest figures from UK Finance are the most encouraging for a while.

“The statistics bear out the regional figures released last week, which showed that across every region, other than in London, mortgage approvals were up.

“Mind you, even in London first-time buyer numbers were up in line with the rest of the country.

“As we know the lending figures for July were for mortgages approved up to three months ago.

“It will be very interesting to see what the figures look like in September and October when the latest HMRC figures showed that property transactions fell considerably in July.”

Gareth Lewis, commercial director of property lender MT Finance, said: “At the back end of the summer holidays, these figures are a nice jump into autumn, and a welcome contrast to the subdued data we have got used to seeing.

“High street banks are lending back at 2009 levels so are loosening their credit a little to encompass more borrowing.

“There is also more demand from people buying property, with home purchases also up, which is great news as it shows transactional flow is happening.”

By Michael Lloyd

Source: Mortgage Introducer

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U.K. Mortgage Approvals Jump to Highest in More Than Two Years

Demand for mortgages jumped last month to the highest since early 2017, according to data published Monday.

Loans for house purchases rose almost 11% from a year earlier to a seasonally adjusted 43,342, lobby group UK Finance said. The report covers seven high street banks representing around 60% of total mortgage lending, data on which are due to be published by the Bank of England on Aug. 30.

Meanwhile, credit card spending was 8.2% higher than it July 2018, while borrowing grew by 3.8% in the year. Spending hit a record 12 billion pounds in the month, while repayments reached a record. UK Finance said this shows that consumers are “managing their finances effectively overall.”

By David Goodman

Source: Bloomberg

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Mortgage approvals hit highest level so far this year

Mortgage lenders approved the highest number of home loans for first-time buyers and movers so far this year during June.

Data from banking trade body UK Finance shows there were 32,760 mortgage approvals for first-time buyers, up 6.1% between May and June 2019.

The number of approvals for home movers increased 9.6% on a monthly basis to 31,000.

However, the figures are down on last year, with first-time buyer approvals declining 1.5% annually and home movers seeing 3.5% fewer loans.

Buy-to-let approvals declined on a monthly and annual basis by 3.6%.

Commenting on the data, Richard Pike, sales and marketing director at Phoebus Software, said: “Given that the country has been in a state of flux for over three years it is hardly surprising that the figures year on year have dipped across the mortgage market sectors.

“When you consider that the mortgages in these June figures were more than likely for applications made in or around the original time we should have been leaving the EU, it is more surprising that the figures weren’t even lower.

“The buy-to-let figures are a concern, but as the next deadline for Brexit nears, there may be some light at the end of the tunnel.

“One way or another we will have a resolution and, despite the government’s best efforts to curb buy-to-let, a resolution should mean that investors that have been holding fire will know whether or not investing in property is once again a viable proposition.

“We may be a nation of home owners but, when buying a home is so expensive, the need for rental accommodation remains as important as ever.”

By MARC SHOFFMAN

Source: Property Industry Eye

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Rise in mortgage possession actions driven by one mystery lender

The number of homes repossessed by lenders in the second quarter of this year was up by 15% on the same period last year – while a rise in mortgage possession actions has been driven by just one large lender, whose identity has not been revealed.

Trade body UK Finance says that between April and the end of June 1,270 homes were taken into possession, but said the increase was driven by a backlog of historic cases.

It also said that the level was far below those seen between 2009 and 2014. In the first quarter of 2009, some 12,000 homes were repossessed.

UK Finance also reports that the number of home owner mortgages in arrears remains at historic lows.

There were 75,890 mortgages (0.84% of the total) in arrears of 2.5% or more in the second quarter.

Within that number, 23,370 were 10% or more in arrears.

The totals were respectively 2% and 3% lower than in the same quarter last year.

However, the number of buy-to-let mortgages in arrears has grown, with 4,660 in arrears of 2.5% or more – a total that is 5% greater than last year.

Within that, 1,200 buy-to-let mortgages were 10% or more in arrears, 12% higher than last year.

A total of 590 buy-to-let mortgaged properties were repossessed in the second quarter of this year, 2% up on the same quarter in 2018.

Separate figures from the Ministry of Justice, also covering the second quarter of this year, show an increase in possession actions – said to be “driven by one large mortgage provider”.

The lender is not named.

The MoJ statistics show that mortgage possession actions are up by 39%.

However, landlord possession actions are down.

The MoJ says there were 6,179 mortgage possession claims in the quarter – way down from 26,419 in the same quarter in 2009.

It currently takes an average of 36 weeks from claim to actual repossession.

In the rental sector, almost all landlord possession claims were by social landlords, with just 23% (6,079) by private landlords, although this was up by 2% from a year ago.

The average time for a private landlord to get from court claim to actual possession was 22.5 weeks, up from 21.6 weeks at the start of the year.

By ROSALIND RENSHAW

Source: Property Industry Eye