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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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Homeowners Opting for 5-Year Fixed Deals for Remortgages

Homeowners who are remortgaging are responding to economic uncertainty by locking in interest rates for up to five years on their new loans.

In July, 50% of remortgage borrowers choose five-year fixed rate products, the highest percentage ever recorded and up 4% from June.

Overall, there were 52,869 remortgages arranged in July, the latest LMS monthly remortgage snapshot report revealed. Of these, the vast majority (96%) were fixed rate deals. Just 3% of remortgage borrowers choose tracker or variable rate mortgages.

Two-year fixed rate deals were the second most popular, the choice of 34% of remortgage borrowers.

Nick Chadbourne, LMS chief executive officer, said: “We’ve seen five year fixes grow in popularity for some time now. This month saw the highest number recorded, with half of borrowers choosing to fix for this length of term. In previous years, two year fixes were the norm, but now only a third of borrowers choose this length as they opt for longer terms.

“This is likely to be a reflection of wider market uncertainty and borrowers wanting to take control of their mortgage payments for a longer period of time,” he added.

42% of remortgage borrowers in July increased their loan size, while 34% kept their mortgage balance the same and 24% reduced the amount borrowed. 44% saw their monthly mortgage payments rise, and 42% will enjoy lower bills in the future.

The number of remortgages was down 1% between June and July, but as the wider housing market contracts, remortgages are the one area showing health.

Figures from UK Finance showed that remortgages were up 8% in June, compared to the previous year, even as home mover, buy to let, and first time buyer mortgages slumped.

Strength in the remortgaging market indicates that homeowners, wary of the expense of buying a new property and a potential Brexit-driven crash in prices, are making do with their current homes. They’re borrowing more to fund their renovation, rather than upsizing.

Source: Money Expert

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Home purchase mortgage approvals up but remortgaging is down

Gross mortgage lending dropped slightly in May 2019 by 0.4% to £21.9 billion, compared with the same month in 2018, new figures from UK Finance show.

Two thirds of this lending (£14 billion) is by the high street banks and this is 3.5% higher than May 2018.

The number of mortgages for home purchase approved by the main high street banks in May 2019 was 49,683, a rise of 9.1 per cent year-on-year, and the highest level since June 2016.

Approvals for other secured borrowing at high street banks rose by 5.9 per to 9,712 but remortgage approvals fell by 3.7 to 30,579 over the year.

The £11.3 billion of credit card spending in May 2019 was 5.6 per cent higher than the same month in 2018. Repayments have remained in line with credit card spending, showing that consumers are managing their finances effectively overall, says UK Finance.

Personal borrowing through loans from high street banks in May stood at £1.7 billion, which is 9.3 per cent higher than the same month in 2018.

Lending through bank overdrafts was 3.2 per cent lower at £6.3 billion compared to May 2018.

Deposits held in the high street banks’ personal accounts and savings accounts were 1.2% higher year-on-year at £854.3 billion.

Richard Pike, Phoebus Software sales and marketing director, said: “Looking at these latest figures from UK Finance, and the upwards swing in the number of mortgage approvals for house purchase, it appears the market is moving again despite the ongoing political turmoil in the UK.

“The increase in credit card spending is something that we do need to be mindful of, but currently we can also see that consumers are so far keeping up with repayments of their debt.

“One wonders whether credit cards are being used to keep up repayments on other areas as well? We must not only consider levels of debt but future affordability if credit card spending keeps increasing”.

By Joanne Atkin

Source: Mortgage Finance Gazette

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Home-movers drive mortgage market after a drop in remortgaging

First-time buyers and home mover mortgage lending rose in April, but there was a drop in remortgage business

There were 27,370 new first-time buyer mortgages completed in April 2019, 7.9 per cent more than in the same month in 2018, according to UK Finance.

The trade body, which represents mortgage lenders, also found an increase in home mover mortgages – there were 25,450 completed in April 2019, 6.4 per cent more than in the same month a year earlier.

However, remortgage business fell in April, with an 3.1% drop in borrowers switching their deal compared to a year earlier.

Andrew Montlake, director of mortgage broker, Coreco, said: “Given Help to Buy, the strong jobs market, increased product choice at higher loan-to-values and lower house prices, it’s no surprise first-time buyers were the key driver of activity in April.

“The increase in homemover mortgages also underlines how Brexit indifference trumped Brexit uncertainty in the first quarter of the year.

“During 2019, the whole issue of Brexit has become so surreal that many households are no longer willing to put their real lives on hold for it, all the more so given that interest rates are at rock bottom.”

Buy-to-let holds steady

There were 5,100 new buy-to-let house purchase mortgages completed in April 2019, the same as this time last year, said UK Finance.

There were 14,400 remortgages in the buy-to-let sector, also the same as this time last year.

Montlake added: “What’s interesting is that the impact of recent tax changes on the buy-to-let market appears to have settled down.

“The buy-to-let market is not what it was but has now reached a new equilibrium.”

Written by: Christina Hoghton

Source: Your Money

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UK remortgaging rate jumps as owners cash in on low interest rates

The number of people remortgaging their homes with additional borrowing spiked in March, according to data released today, as people took advantage of favourable interest rates.

Meanwhile the number of new loans to both movers and first time buyers fell in March year-on-year, figures from finance and business services company UK Finance have revealed.

In March there were 16,180 new remortgages with additional borrowing, a 9.1 per cent increase year on year. The average amount taken out on top of the remortgage money was £55,700.

There were 1.1 per cent fewer simple pound-for-pound remortgages in March, at 15,030.

New first-time buyer mortgages reached 28,800 in March, according to the finance and business services organisation, 2.4 per cent fewer than in the same month a year earlier.

The number of new mortgages going to those moving house fell six per cent to 25,280.

Andrew Montlake, director of the UK mortgage broker Coreco, said: “With rates nearing rock-bottom given the intensity of competition among lenders, remortgages have gone off the Richter Scale.”

“The 9.1 per cent rise in additional borrowing remortgages compared to a year ago reflects the fact that a lot of people are choosing to add value to their existing homes rather than move,” he said.

“While home-mover mortgages were down in March, purchases have really started to gain momentum since April, with the usual late spring lift being boosted by a growing indifference to Brexit,” Montlake added.

Keith Haggart, managing director of mortgage provider Responsible Lending, said: “March was meant to be the month when the Brexit trigger was pulled, and it may have been a significant deterrent for first-time buyers who tiptoed away from the housing market for the first time in six months, despite low interest rates and other incentives.”

“The jump in remortgaging chimes with a market that is languishing on low supply of homes for sale,” he said.

By Harry Robertson

Source: City AM

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Mortgage approvals hit record highs in UK regions despite property market lull

Banking trade body UK Finance has unveiled lending data showing how well first-time buyers, home movers and those remortgaging fared during 2018 in the UK regions of London, Scotland, Wales and Northern Ireland.

Despite concerns about the property market stalling, the data shows some regions had record levels of approvals for first-time buyers and home movers.

Approvals for first-time buyers in Northern Ireland hit a 14-year high last year at 10,600, up 9.4% annually.

Similarly, approvals to first-time buyers in Wales hit their highest level for 12 years at 16,900, up 4.3%.

There were 42,800 new first-time buyer mortgages in London during 2018, 0.5% more than in 2017, but Scotland recorded a 3.1% annual drop to 34,100.

In the home mover market, Northern Ireland recorded the highest number of approvals since 2007 at 6,600, up 6.5% annually.

The number of home mover mortgages approved in Wales was at its highest level for 11 years at 15,800, a 0.6% annual increase.

However, home mover mortgage approvals fell by 5% annually in the capital to 28,800 and declined 0.9% in Scotland to 34,300 during 2018.

Meanwhile, all four regions had record levels of remortgaging approvals during 2018.

Remortgage approvals hit decade-highs in London and Wales.

There were 60,400 remortgages in the capital, a 6.2% annual increase, while Wales recorded 20,100, 12.3% more than in 2017.

There were 9,500 remortgages in Northern Ireland, up 11.8% year-on-year and remortgage approvals in Scotland hit a seven-year high at 35,400, up 11% on 2017.

Commenting on the figures, Jonathan Harris, director of mortgage broker Anderson Harris, said: “First-time buyer numbers across the country have risen on the back of cheap mortgage rates and Stamp Duty exemptions.

“The much-maligned Help to Buy scheme is also playing a large part in helping first-time buyers on to the housing ladder, while more lenders are offering high loan-to-value deals.

“In London, despite recent price falls, affordability remains an issue with the deposit the biggest barrier to home ownership.

“The Bank of Mum and Dad is being called upon more than ever before, but those who don’t have this resource are finding it very difficult.”

Source: Property Industry Eye

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October remortgage levels reach ten year high

The remortgage market has reached its highest level in a decade bolstered by competitive rates, according to the latest UK Finance figures.

In its mortgage trends update out today (December 12), the trade body reported 50,500 homeowner remortgages completed in October, representing an increase of 23.2 percentage points on the previous year.

At a value of £9.2bn this was 22.7 percentage points higher than in October last year.

The first-time buyer market also saw reasonable growth in October, increasing by 8.2 percentage points on the same month a year earlier to reach 32,900 deals.

UK Finance found the average first-time buyer in the month was aged 30 with a gross household income of £42,000.

Jackie Bennett, director of mortgages at UK Finance, said the figures showed homeowners were taking advantage of a competitive market and locking into attractive deals.

She added: “This also reflects the large number of fixed rate mortgages coming to an end, which is expected to continue into 2019.

“There has been relatively strong growth in the number of first-time buyers, with schemes such as Help to Buy providing vital support to those getting a foot on the housing ladder.”

The government’s Help to Buy scheme was extended in the Autumn Budget, now due to end in 2023.

In keeping with recent trends, the buy-to-let purchase market continued to soften in October with 6,100 new buy-to-let home purchase mortgages completed in the month – 9 percentage points fewer than in the same month a year earlier.

As a value, this was £0.8bn of new buy-to-let purchase lending in the month, 20 percentage points down year-on-year.

However, the buy-to-let remortgage market increased to 15,700 completions – some 5.4 percentage points higher than the same month a year earlier, at a value of £2.5bn.

Jonathan Harris, director of mortgage broker Anderson Harris, said borrowers were continuing to take advantage of cheap rates, fuelled by continuing uncertainty around Brexit and the economy.

He said: “With the number of new purchases remaining subdued, lenders are focusing on where the business is and offering competitive deals to those coming off fixed-rate mortgages – this trend is set to continue into 2019.”

Mr Harris said landlords were also remortgaging as they made their property portfolios work harder and squeezed out every bit of profit they could.

He added: “First-time buyers are taking advantage of the lack of competition from landlords for smaller properties, such as one-bedroom flats, and we expect this to continue into next year.”

Jeremy Leaf, north London estate agent and former RICS residential chairman, said whilst the figures were a little historic, they did reflect what has been seen on the high-street.

He said: “Buyers and sellers are trying to find an accommodation on price, with affordability just as important as Brexit when it comes to decision making.

“First-time buyers, in particular, are taking advantage of reduced competition from buy-to-let investors still compromised by recent tax and regulation changes.”

Mr Leaf added: “Political shenanigans seem to be more of a preoccupation among buyers in the southeast than elsewhere.

“It remains to be seen how the turmoil of the past month or so plays out in the market but the signs are so far that early new year activity will continue in a relatively subdued manner, much as it has over the past few months.”

Source: FT Adviser

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UK mortgage approvals for new house purchases tumble despite growth in remortgaging

The number of mortgages approved for house purchases was almost five per cent lower in August compared with the same time last year, providing fresh evidence of flat activity in London’s property market. Despite the fall in new mortgage approvals, remortgaging soared 9.2 per cent during the month, as a rising number of homeowners looked to lock in more favourable deals ahead of expected higher interest rates.

However, the mortgages approved for people buying houses were down 4.2 per cent year-on-year, underlining a continuation of subdued activity in London’s housing market.

Meanwhile, gross mortgage lending for the total market in August was £24.1bn, falling 1.2 per cent lower than a year earlier, according to today’s UK Finance figures.

Jeremy Leaf, north London estate agent and a former Rics residential chairman, said: “At first glance these figures look quite encouraging but when you appreciate that a substantial part of the increase in lending is to do with remortgaging in anticipation of higher interest rates, the picture is not so rosy.”

Leaf added: “Mortgage approvals for house purchase are lower compared with this time last year, which was not a particularly impressive time anyway. Clearly, the market remains fairly flat without too much movement one way or the other, which is reflected on the high street.

“Confidence is in short supply unless new market conditions are recognised. Having said that, we are seeing more viewings and more realism as the summer period is now behind us. It is now up to sellers to recognise that the market is unlikely to change for the better for some time.”

The news comes despite recent Bank of England data showing that mortgage lending picked up in the second quarter of the year, with new commitments hitting their highest level in more than a decade amid a bump in the number of first-time buyers coming onto the property market.

Peter Tyler, director at UK Finance, said: “Remortgaging continued to dominate in August, as homeowners took advantage of a competitive market to lock into attractive deals. Growth in card spending remained fairly strong, reflecting the boost to retail sales from the warm weather as well as the growing use of credit cards as a preferred means of payment.

“However, the overall economic outlook remains mixed as household incomes continue to be squeezed by rising inflation.”

Source: City A.M.

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This July was strongest for remortgaging in a decade

This July was the busiest for remortgaging in a decade, as there were 46,900 residential transactions worth £8.7bn that completed, UK Finance figures show.

This means that volumes were 23.1% higher than the same month in 2017 and by value there was a 26.1% increase year-on-year.

There was a similar trend in buy-to-let remortgaging, where 14,700 loans worth £2.4bn were completed, increases of 7.3% by volume and 9.1% by value year-on-year.

Jackie Bennett, director of mortgages at UK Finance, said: “The residential remortgaging market saw its strongest July in over a decade, as homeowners pre-empted the latest Bank of England rate rise by locking into attractive fixed-rate deals.

“There was also considerable growth in remortgaging in the buy-to-let sector, showing that while recent tax and regulatory changes are impacting on new purchases, many existing landlords remain in the market.”

The number of buy-to-let purchase mortgages completed fell by 14.1% year-on-year, with just 14,700 being completed.

Richard Pike, sales and marketing director of Phoebus Software, said: “While July is traditionally a busy month, it is clear that a number of people were kicked into action by the anticipation of the base rate rise.

“It was not such a rosy picture for purchases however. It is clear that consumer confidence is starting to take a hit, undoubtedly by all the talk of a no deal Brexit.

“Whenever there is uncertainty, people tend to put off making big decisions such as buying a new home. I expect to see more and more caution over the next six months as people wait to see what the outcome will be and what effect it will have on them personally.

“If ultimately, the result is better than expected, this could turn out to be pent up demand with a surge in house moves afterwards, but it could be many months before we see this come to fruition.”

Shaun Church, director at Private Finance, said: “Remortgage activity appears to be the main thing keeping the buy-to-let market afloat.

“Though punitive regulatory changes have dissuaded new entrants to the market, today’s data suggests many existing landlords are staying put.

“With mortgage costs often being one of landlords’ biggest expenses, swapping to a lower-rate deal is a sensible strategy for making a rental property more profitable.”

Source: Mortgage Introducer

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Fall in remortgaging and buy-to-let lending

First-time buyer mortgage lending increased in the second quarter of this year but remortgaging and buy-to-let experienced a decline.

Data released today by the Bank of England revealed the outstanding value of all residential loans continued on its upward trajectory, rising in Quarter Two (Q2) to £1,417.2 billion which is 3.8% higher than Q2 last year.

According to quarterly statistics, based on the lending activity of over 300 lenders and administrators, new commitments – which are loans agreed to advance in coming months – were at their highest level since the first quarter of 2008.

First-time buyers

There was also an increase in the amount of lending to first-time buyers and the proportion of high loan-to-income (LTI) finance has increased during the quarter too. High LTI lending was described as loans above four times the value of the annual income for a single buyer or three times the annual income for joint buyers.

However, the overall proportion of buy-to-let and remortgaging loans have decreased since the last quarter, the data revealed.

As a proportion of new lending, remortgaging accounted for 30.8% – a fall of 2% on the previous quarter. Meanwhile, the share of new lending for which buy-to-let accounted was also in decline this quarter, down to 13.1%.

Tax changes hitting buy-to-let

Ross Boyd, founder of mortgage platform Dashly.com, blamed the tough new rules facing landlords on the lull in buy-to-let.

He said: “Where homeowners tread, landlords are continuing to choose not to follow. For investors it’s more of the same, with the decline in buy-to-let lending since the first quarter firmly against the run of play.

“It’s more evidence of a slowdown precipitated by hostile tax changes in recent years that have left landlords licking their wounds.”

He added: “Traditional homeowners, though, are not feeling the pinch quite so much as arrears continue to fall. It’s yet another sign of consumer confidence, even if it’s not totally surprising with rates still on the floor by historic standards.”

Source: Mortgage Finance Gazette