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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

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Mortgage Prisoners: 800,000 homeowners urged to switch to cheaper mortgages

Many homeowners became trapped as a result of the financial crisis in 2008, whereby their mortgage rates and affordability terms changed dramatically and many had their mortgages sold to private investors as part of bailing out various banks, with no choice but to accept terms given to them.

The Financial Conduct Authority estimates around 800,000 homeowners are currently overpaying for their mortgages and could be saving up to £4,000 each per year.

The City Regulator has put forward recent proposals to help ‘mortgage prisoners’ which currently affects an estimated 120,000 households in the UK. This group are currently unable to get new mortgage deals or remortgage due to a range of circumstances, and it is currently putting them on much higher standard variable rate, charging up to 5% or 6% for their mortgage per month.

Many homeowners became trapped as a result of the financial crisis in 2008, whereby their mortgage rates and affordability terms changed dramatically and many had their mortgages sold to private investors as part of bailing out various banks, with no choice but to accept terms given to them.

Many enjoyed 100% mortgages or being able to borrow 7 times their salary, which has since been slashed to 4.5 times at most. But this has had profound effects on their mortgage terms, and for some, it has made getting a new mortgage deal unfeasible.

You can also become a mortgage prisoner if you see a big fall in salary or fail to meet your provider’s new, stricter affordability checks (due to too many outgoings or bad credit). Or similarly, if you become a first time buyer, but the over the next few years, the mortgage lender reduces the amount you can borrow against your salary.

These circumstances have left many mortgage prisoners paying huge amounts and unable to change their scenario, meanwhile switching to different remortgage deals could offer just 1-2% per month and save the household up to £4,000 per year.

Households ‘unaware’ of cheaper deals
The FCA estimates that up to 800,000 homeowners in the UK could in fact be paying much lower rates, without their knowledge.

The regulator states that people should not get used to paying high amounts for their mortgages and should seek new deals and remortgages, and make the most of introductory offers and consult other lenders where possible.

What options are available for mortgage prisoners?
Meeting the stricter affordability checks for mortgage providers and banks is very important. If you can find ways to increase your salary (easier said than done), this can certainly help. But perhaps lowering your household costs and outgoings will make a big difference too, to show that you have improved affordability. Some simple savings could include reducing your monthly spend on food and takeaways, joining a cheaper gym or quitting smoking.

Whilst not always easy, overpaying on your mortgage will reduce the amount outstanding and therefore be cheaper long-term. The sooner that you can get out of your contract that holds you a prisoner, the better.

Downsizing or increasing any cash in your home can also help. If your children have flown the nest, downsizing to a smaller property can help free up your finances and get your out of the mortgage trap. Around 80,000 homeowners over the age of 55 have used equity release in the last year as a way to release cash from their home. This can be an expensive product, but usually causes you to pay off your mortgage in the process and give you enough cash for the remainder of your lifetime. There is also no tax on this product and will not incur inheritance tax either.

Moving home can be very tricky, unless you are downsizing and borrowing lower amounts. Many households have reverted to bridging loans, which can provide an effective way to borrow money if moving house (without having sold yours). But this can come with huge risks if the housing market crashes and if you fail to sell your home, you could be at risk of repossession.

By Daniel Tannenbaum

Source: Accountancy Age

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Lenders take profit hit in mortgage price war

The so-called mortgage price war has slashed lenders’ profits in the first half of the year, with some banks and building societies seeing their income drop by up to 10 per cent.

Sustained pressure on mortgage pricing — due to a competitive mortgage space which has seen lenders cut rates in a ‘race to the bottom’ — has affected lenders across the board and caused profits to plummet at some smaller firms, according to their latest half-yearly results.

Leeds Building Society reported a total income of £101m for the six months to June — a decrease of 10.4 per cent year-on-year — and saw its profits reduce by almost £10m (an 18 per cent drop year-on-year), putting the results down partly to sustained pressure on mortgage pricing.

Meanwhile, Coventry Building Society reported the “depth of competition in mortgages” — alongside economic and political uncertainty — had resulted in “strong price competition” when its results showed its total income of £189.8m had dropped by 10.5 per cent compared with June 2018.

The society’s net interest margin — the difference between the profits made from investments (mortgages) and the interest paid out to savers — narrowed by 14 basis points compared with the year before due to “continuing competition in the mortgage market” and the “absence of notable growth in the housing market”.

The situation was similar with Nottingham Building Society, which reported “increasing competition in the face of muted demand for mortgages” meant new mortgage rates continued to fall despite their “already record low levels”.

Nottingham stated it had moderated its lending plans in the face of these falling rates as it was “not sustainable to grow” at the same rate it had done. It reported a decrease in net interest income of £1.8m year-on-year — down 7 per cent.

The challenging market conditions saw Tesco Bank pull the plug on its mortgage lending arm, and its chief executive said the market had left it with “limited profitable growth opportunities”.

Yorkshire Building Society’s net interest margin of 1.06 per cent was down from 1.13 per cent in 2018, while Skipton Building Society saw its margin drop 12 basis points when compared with the year before.

Skipton stated its decline in margins was reflective of “intense competition in the mortgage market” and said the ongoing pressures meant it anticipated lower profits for 2019 than the year before.

Meanwhile Yorkshire said: “We continue to see margins under pressure across the mortgage market, driven in part by the competitive actions of the newly created ring-fenced banks.”

New Bank of England rules, applicable from January 1 this year, created a firewall between the banks’ investment banking operations and their lending arms to ensure they were still able to lend and consumer money was safe even if a shock hit the banking sector.

With the ring-fence in place, funds which formerly could have been used to back riskier investments are now trapped in the retail environment and being diverted to the mortgage market, which has amplified the price war.

Although the mortgage price war has not affected these larger retail banks to the same extent as building societies and challenger lenders, most still reported the competitive market had impacted their profits and margins.

For example, Barclays reported a total income of £3.57bn, an increase from last year, but said this had been “offset by mortgage margin compression”, while Lloyds’ said its net interest margin had narrowed by five basis points since H118 due to “continued mortgage competition”.

A “fall in income due to the highly competitive mortgage market” impacted Santander’s profitability as its net interest margin dropped 11 basis points and its profit before tax was down 36 per cent year-on-year to £575m.

Santander reported this was also down to pressure from the mortgage back book as more customers opted to come off the standard variable rate.

Data from Moneyfacts showed the average rate of a two-year fixed — 2.49 per cent — is more than 1 percentage point lower than the average in August 2014 (3.54 per cent).

Longer term fixes have dropped even more substantially. In August 2014, the average five-year fixed sat at 4.22 per cent, compared with 2.84 per cent in today’s market.

The Bank of England has warned lenders it is “watching them like a hawk” amid the price war, cautious that lenders do not opt for riskier lending to make up for lost margins.

By Imogen Tew

Source: FT Adviser

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UK mortgage approvals rise but consumer lending slows

Britain’s housing market received a modest lift in June as mortgage approvals increased by more than analysts had expected, Bank of England figures showed today.

Annual lending growth to UK consumers slowed from 5.7 per cent in May to 5.5 per cent in June, however, the slowest rate since April 2014.

The number of people taking out mortgages increased by around 800 in June to 66,400 from 65,650 in May. This was the highest number since January and above economists’ expectations of 65,750.

Brexit uncertainty has weighed on house prices in 2019, particularly in London where official figures showed they dropped 4.4 per cent in May year on year, pleasing first-time buyers but upsetting homeowners.

“June’s mortgage data tie in with the view that housing market activity got some help from the avoidance of a disruptive Brexit at the end of March, but the overall benefit has been relatively limited,” said Howard Archer, chief economic advisor to the EY Item Club.

The closely-watched housing survey by the Royal Institution of Chartered Surveyors (Rics) for June showed a “very modest” rise in buyer demand.

Net lending to UK consumers rose by £1bn in June, higher than analysts’ expectations. Yet this was below June 2018’s £1.4bn figure, and annual consumer credit growth slowed to a 5-year low.

“The overall slowdown in consumer credit growth has clearly been significantly affected by markedly weaker private car sales as this has reduced demand for car finance,” said Archer.

Consumer spending has been a bright spot in the UK economy in 2019 as trade and business investment have suffered from political uncertainty. However, there are signs it is slowing.

A CBI survey showed retail sales fell at the fastest pace in over 10 years in June, due in part to the warm weather and football world cup a year earlier.

By Harry Robertson

Source: City AM

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UK mortgage approvals rise in June

The number of mortgages approved in the UK reached one of it’s highest levels in the past two years in June.

Last month the number of mortgages given the go-ahead for house purchases rose to 42,653 up from 42,407 in May and close to April’s two-year high of 42,792, according to data from UK Finance.

Analysts said the spike in approvals could be attributed to the UK avoiding crashing out of the EU at the end of March.

EY Item Club chief economic adviser Howard Archer said: “June’s mortgage data ties in with the view that housing market activity has received some help from the avoidance of a disruptive Brexit at the end of March, but the overall benefit has been relatively limited.

“Improved consumer purchasing power and robust employment growth have also recently been helpful for the housing market.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, added: “Encouragingly, the number of mortgages for home purchase rose in June compared with the same month last year, despite all the continued uncertainty over Brexit.

“Hopefully, the installation of a new prime minister at number ten will effect a positive change for the wider economy and housing market, although it is still very early days.”

Meanwhile, credit card lending growth slowed in June. Net credit card linking contracted from £247m in May to £119m last month.

By Jess Clark

Source: City AM

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Mortgage lending down 4%

Gross mortgage lending in the UK fell by 4 per cent year-on-year in June, latest data has shown.

Figures from UK Finance, out today (July 24), showed that £21.9bn of lending across the residential mortgage market took place in June — 4 per cent less than in the same month last year.

High-street banks performed better than the rest of the market, according to the results, as gross mortgage lending from the big lenders only fell 1.1 per cent.

Mortgage approvals for house purchases increased by 2.9 per cent year-on-year as 48,539 consumers were approved in June.

This marked a slight drop from the 49,683 approvals in May but figures were still above average for the year.

Mortgage approvals — where a consumer is told they are eligible for a mortgage but is yet to actually borrow the money — are typically an indicator of how the future mortgage market will fare as these consumers are likely to go on to borrow the funds in the upcoming months.

Approvals for remortgages dropped slightly, by 1.4 per cent, to 29,415. Consumers remortgaging have bolstered the market in recent years and the number of remortgages is predicted to reach its peak later this year.

Steve Seal, director of sales and marketing at Bluestone Mortgages, said today’s figures didn’t show any “major jump” but that government schemes and attractive remortgage deals were continuing to appeal to borrowers.

Gareth Lewis, commercial director of property lender MT Finance, said the high street banks’ uplift in home purchase approvals was positive but could be down to the more attractive deals lenders were pushing.

He added: “Deals are being done. A colleague recently sold his house in the north of England in two days and this wasn’t because it was priced too cheaply. 

“There are people who are willing to get on and buy when an opportunity presents itself.”

Mr Lewis also thought the new prime minister could look at tax and stamp duty to help the property market, noting there were “measures afoot” to help stimulate property sales.

Boris Johnson was announced as leader of the Conservative Party yesterday (July 23) and there have been reports that he would be open to reforming stamp duty.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Encouragingly, the number of mortgages for home purchase rose in June compared with the same month last year, despite all the continued uncertainty over Brexit. 

“Hopefully, the installation of a new prime minister at number 10 will affect positive change for the wider economy and housing market, although it is still very early days.”

Mr Harris added that swap rates continued to fall, with a number of lenders, including Nationwide, NatWest and Accord, cutting some mortgage rates in the past week. 

He thought this downward pressure on pricing was likely to continue as lenders competed for business.

By Imogen Tew

Source: FT Adviser