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Completed remortgages up 7.1% year-on-year

The mortgage market has seen a pre-summer boost as there were 36,000 new homeowner remortgages completed in the month, some 7.1% more year-on-year, UK Finance’s Mortgage Trends Update has found.

The £6.3bn of remortgaging in the month was 6.8% more year-on-year. There were 32,200 new first-time buyer mortgages completed in the month, some 8.1% more than in the same month a year earlier.

The £5.4bn of new lending in the month was 12.5% more year-on-year and the average first-time buyer is 30 and has a gross household income of £42,000.

Steve Seal, director of sales and marketing, Bluestone Mortgages, said: “Whilst it’s good to see continued first-time buyer activity, these results do not reflect the growing pool of borrowers who struggle to access funding.

“Contractors, entrepreneurs or self-employed workers with complex financial backgrounds usually struggle to meet the vanilla criteria of high-street lenders – even if they have a reliable history of repayments.

“The specialist lending market has a significant role to play in closing this funding gap; providing a service that understands an individual’s circumstances and supporting borrowers in their homeownership aspirations.”

There were 31,100 new homemover mortgages completed in the month, some 4.4% more than in the same month a year earlier.

The £6.6bn of new lending in the month was 4.8% more year-on-year and the average homemover is 39 and has a gross household income of £55,000.

There were 5,500 new buy-to-let home purchase mortgages completed in the month, some 9.8% fewer than in the same month a year earlier. By value this was £0.7bn of lending in the month, 22.2% down year-on-year.

There were 14,600 new buy-to-let remortgages completed in the month, some 15% more than in the same month a year earlier. By value this was £2.3bn of lending in the month, 21.1% more year-on-year.

Matt Andrews, managing director of mortgages at Masthaven, said: “Growing first-time buyer figures represent a huge bright spot in mortgage lending, with figures even outstripping homemovers.

“Likely to be attracted by good rates, the various government backed schemes and the emergence of challenger banks and specialist lenders who provide alterative options to the big high street names, the choice for first-time buyers has never been so good.

“As expected, remortgaging continues to rise, largely due to the anticipated Bank of England rate rise.

“While uncertainty remains around timescales, brokers need to see this as an opportunity to reengage with their back-books.

“The same opportunity can be seen in the buy-to-let space – much work needs to be done here to attract new and veteran landlords, with specialist lenders leading the way in providing flexible and innovative products.”

Jackie Bennett, director of mortgages at UK Finance, said: “The mortgage market is seeing a pre-summer boost, driven by a rise in the number of first-time buyers and strong remortgaging activity.

“It is also particularly encouraging to see an increase in homemovers, after a period of relative sluggishness in this important segment of the market.

“However, affordability remains a challenge for some prospective buyers and this is reflected by a gradual increase in loan to income multiples.

“Meanwhile purchases in the buy-to-let market continue to be constrained by recent regulatory and tax changes, the full impact of which have yet to be fully felt.”

Source: Mortgage Introducer

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Remortgage activity bounces back in April

The latest mortgage trends report from UK Finance has shown a surge in both homeowner and buy-to-let remortgages, which one expert described as ‘Blitz Spirit’.

UK Finance’s latest Mortgage Trends Update revealed there was strong growth in remortgaging in April 2018.

New homeowner mortgages were up 36 per cent and buy-to-let remortgages were up 32.4 per cent compared to the same month a year earlier.

James Tatch, analytics expert at UK Finance, said the figures showed mortgage lending operating in a way that the group had previously described as a two-speed market.

He said: “In this case house purchase is relatively slow (strong first-time buyer numbers offsetting continuing weak activity where homeowners are looking to move) whilst remortgaging is showing strong year-on-year increases.”

There were 40,800 remortgages in April, a 36 per cent increase on the same month a year ago.

Mr Tatch said the remortgaging activity was driven by a fear of coming rate hikes, along with a number of relatively attractive deals currently on the market.

The first-time buyer figures were particularly strong.

There were 26,700 new first-time buyer mortgages completed in the month, some 3.5 per cent more than in the same month a year earlier.

The £4.4bn of new lending in the month was 4.8 per cent more year-on-year, the figures showed.

The average first-time buyer is now borrowing 3.62 times their salary and getting 84.9 per cent of the purchase price of £167,000, UK Finance reported.

The average age of a first-time buyer is now 30 and he or she has a gross household income of £42,000.

Mike Scott, chief property analyst at estate agent Yopa, said that despite the slight increase in first-time buyer mortgage sizes, these mortgages are still relatively affordable.

He said: “The average first-time buyer now borrowing 3.62 times their salary and getting 84.9 per cent of the purchase price of £167,000.

“However, these mortgages are still quite affordable, with first-time buyers’ mortgage repayments averaging only 17.2 per cent of their household income, which is actually less than the 17.5 per cent average for all homemovers.

“The biggest obstacle remains the need to find £25,000 (on average) for the deposit.”

The picture on buy-to-let was more mixed.

Despite the strong growth in buy-to-let remortgages, which were up 32.4 per cent by number and 35.3 per cent by value than the same month the previous year, tax changes have prompted a slump in new lending.

There were 5,000 new buy-to-let house purchase mortgages completed in the month, some 5.7 per cent fewer than in the same month a year earlier.

By value this was £0.7bn of lending in the month, 12.5 per cent down year-on-year.

Mark Dyason, managing director of specialist property finance broker Thistle Finance, said: “We are seeing a particular surge in buy-to-let remortgages, especially among portfolio landlords.

“The fact that buy-to-let remortgages are up by a third compared to a year ago shows that those landlords still in the market are taking it seriously and still see a future in it.

Source: FT Adviser

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Intermediaries Report Remortgaging Surge On Property Investments

There has been a remortgaging surge from UK buy to let investors, with intermediaries reporting that 52 per cent of buy to let mortgages in the first quarter of 2018 came from investors looking to remortgage.

The figures reported for Q1 mark a sharp rise from the 29 per cent recorded in the first quarter of 2015 before the Summer Budget of that year. During the Budget, tax changes were announced including the gradual removal of tax relief on buy to let mortgage interest.

Intermediaries have also seen a drop in the proportion of mortgage applications from first time landlords, down from 19 per cent to 13 per cent. There has also been a fall in landlords remortgaging to raise funds to extend their portfolios. Remortgaging for portfolio expansion has dropped from 39 per cent to 22 per cent.

Of those looking to remortgage, the proportion aiming to secure a better interest rate reached the highest level ever in Q1 2018. This is in sharp contrast to three years ago when equal numbers of landlords were remortgaging for a better rate and to raise capital. In the first quarter of 2018, 60 per cent of landlords stated that securing a better interest rate was their main agenda. This is in comparison to the 30 per cent of landlords who said that raising capital was their main priority. The gap between landlords looking for a better rate and those raising capital is at its widest since 2013.

Managing Director of Mortgages at Paragon, John Heron, said: ‘There’s a wide range of factors contributing to the surge in landlords remortgaging at the moment. These include the expiry of the initial term on mortgages taken out ahead of the stamp duty changes for second properties, the expectation of rate rises on the horizon and a desire to minimise interest costs in the face of new mortgage affordabilty rules. It will be interesting to see the extent to which mortgage applications for purchases and portfolio extensions increase once these factors have played out.’

Source: Residential Landlord

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Landlords in remortgage surge

Intermediaries reported that 52% of buy-to-let mortgage cases in Q1 2018 were for landlords seeking to remortgage.

This was up sharply from 29% in Q1 2015 prior to the Summer Budget in the same year when wide-ranging tax changes were announced, including the gradual removal of tax relief on buy-to-let mortgage interest.

John Heron, managing director of mortgages at Paragon, said: “There’s a wide range of factors contributing to the surge in landlords remortgaging at the moment.

“These include the expiry of the initial term on mortgages taken out ahead of the stamp duty changes for second properties, the expectation of rate rises on the horizon and a desire to minimise interest costs in the face of new mortgage affordabilty rules.

“It will be interesting to see the extent to which mortgage applications for purchases and portfolio extensions increase once these factors have played out.”

Over the same time period, intermediaries said they have seen a drop in the proportion of mortgage applications from first-time landlords, down from 19% to 13% of the total.

They also reported a fall in landlords remortgaging to raise funds in order to extend their portfolios. Remortgaging for portfolio expansion has fallen from 39% to 22%.

Among those landlords looking to remortgage, the proportion seeking to secure a better interest rate reached the highest level ever in Q1 2018.

Compared with three years ago when equal numbers of landlords were remortgaging for a better rate and to raise capital, in Q1 2018 60% of landlords said securing a better interest rate was their primary objective.

This compares with just 30% of landlords who said raising capital was their top priority. As a result, the gap between landlords looking for a better rate and those raising capital is now at the widest seen since 2013.

Source: Mortgage Introducer

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Double-digit drop in remortgagors and buy-to-let buyers in March

Fewer borrowers chose to switch their mortgage while the number of landlords buying dropped 20%, according to the latest figures. Remortgaging levels softened after a busy start to the year, according to UK Finance.

In March there was £5.6bn of remortgaging, 9.7% down year-on-year. There were 32,400 new homeowner remortgages completed in the month, some 12% fewer than in the same month a year earlier.

Buy-to-let purchase business fell more significantly. There were 5,500 new buy-to-let home purchase mortgages completed in the month, 19% fewer than in the same month a year earlier. By value this was £0.8bn of lending, 20% down year-on-year.

UK Finance said the recent softening of the buy-to-let market is mostly down to a number of recent tax and regulatory changes, including the limiting of landlords’ Mortgage Interest Tax Relief (MITR), the 3% Stamp Duty surcharge and new underwriting requirements introduced by the Prudential Regulatory Authority (PRA).

Small boosts

First-time buyer lending held up better with a small increase in lending by value, despite fewer first-time buyers actually taking out deals. There was £5.1bn of new lending to first-time buyers in the month, up 2% year-on-year. 31,200 new first-time buyer mortgages were completed in the month, some 1.9% fewer than in the same month a year earlier. The average first-time buyer is 30 and has a gross household income of £42,000.

Jackie Bennett, director of mortgages at UK Finance, said: “Remortgaging levels softened in March, after a busier than usual start to the year saw customers locking into attractive deals ahead of a potential interest rate rise.

“There has been relatively flat growth in lending to first-time buyers, reflecting recent Bank of England figures showing a fall in mortgage approvals.

“Meanwhile the buy-to-let market remains subdued, as recent tax and regulatory changes continue to have an impact on demand.”

Separate figures from the Bank of England show that gross mortgage lending in the first quarter of 2018 was £61.1 billion, up 3.4% from £59.0 billion in the first quarter of 2017.

Source: Your Money

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First-time buyers and remortgaging drives mortgage market

First-time buyers and homeowner remortgaging are driving increased lending in the UK mortgage market according to data from UK Finance.

Residential remortgaging remained the biggest source of activity within the market despite it falling from a spike of almost 50,000 in January.

Experts believe the prospect of a Base Rate rise from the Bank of England next month is still motivating borrowers to secure fixed-rate deals.

Remortgage transactions rose 11.3% on a year earlier in February with 35,400 deals made with £6bn of lending completed – up 11.1% on the same month last year.

The buy-to-let market also continues to be powered by remortgaging with these deals up 20.5% on February 2017 to 14,100 – again this market saw a notable spike in January.

However, buy-to-let purchases continued to slide with the 5,200 completed purchases down 8.8% from last February.

Residential purchases

Encouragingly, the combined total of 50,000 residential house purchases conducted by first-time buyers and home movers was the highest figure for February since 2007.

The number of first-time buyers hit 25,200 in February, up 2.4% compared to the same month last year, while the 24,800 home movers remained unchanged on February last year.

Both these totals were largely on par with January’s figures and were the lowest by some margin over the last 12 months.

Around £9.3bn in lending was conducted to these groups – up from £9.1bn in February last year, but down marginally on January.

Fix costs

UK Finance director of mortgages, Jackie Bennett, said: “Homebuyers have shaken off the winter blues, with purchases by first-time buyers and home movers reaching their highest levels for February in over a decade.

“Remortgages are also up year-on-year, as homeowners look to fix costs amid anticipation of further interest rate rises.

“Meanwhile the buy-to-let market continues to operate at stable but subdued levels, due in part to the impact of recent legislative and tax changes,” she added.

Kensington Mortgages sales and marketing director, Craig McKinlay, said the potential for interest rate rises was likely the source of so much activity.

“Amid the noise about the Bank of England’s next decision on interest rates, remortgaging levels continue to remain high as borrowers organise their finances before any potential rate rise,” he said.

“Prudent borrowers are now locking themselves into competitive mortgage deals that remain on offer through the mortgage market, whether it’s for two, three or five years.”

Source: Your Money

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Record number of landlords remortgaging for home improvements

The number of landlords remortgaging to release money for home improvements has reached a record high, Countrywide’s Monthly Lettings Index found.

In the last 12 months, out of the 171,421 landlords who remortgaged their buy-to-let property, 9,523 did so to take money out to spend on their investment.

This is up from 8,459 in 2017 and three times more than in 2016 (2,967).  In the last 12 months 5.6% of landlords who remortgaged released cash to spend on their property, up from 1.9% in 2016.

The greatest increase was in the East of England where, in the last 12 months, one in 10 landlords (10.4%) who remortgaged released money to spend on home improvements, up 6.8% in the last two years.

Johnny Morris, research director at Countrywide, said: “A record number of landlords are remortgaging to release money to spend on their properties instead of trading up.

“The additional transaction costs incurred from the stamp duty changes for second-homeowners means more landlords are choosing to invest in their properties, refurbishing and improving them and holding on to them for longer to maximise gains.

“Average rents grew in seven out of eight regions across Great Britain, with Scotland being the only region to see falls.  Rental growth during the first quarter of this year stands at 2.1%, 0.5% faster than the same period in 2017, as low stock levels continue to drive growth.”

Every region across the UK has seen a rise, but regions in the South have seen the biggest growth in landlords releasing cash.  In London, 7.4% of landlords remortgaging released money for home improvements, up 4.4% in the last two years.

Landlords in London took out the most money to spend on buy-to-let improvements, £35,470 on average.

This is over three times the amount an average landlord in Yorkshire and the Humber withdrew (£11,150).  Across Great Britain as a whole, the average landlord remortgaging to make improvements took out £22,850.

The Midlands saw the fastest rental growth, up 2.8% year-on-year, followed by Wales (2.1%) and Greater London (2.1%). Average rents in Scotland fell for the second month in a row, but the rate of decline slowed in March.

Source: Mortgage Introducer

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House purchases fall as remortgaging drives lending growth

Mortgage lending grew 4.9% in February to £19bn year-on-year, however this appears to have been driven by a rise in remortgaging to replace a collapse in house purchase approvals.

The £19bn total last month was also down almost £3bn on January and below the monthly average of £21.4bn for 2017.

According to the data from UK Finance, 33,110 house purchase mortgages were approved by just the high street banks in February, down by 10.8% compared to the same month last year. In contrast, 25,999 remortgages were approved by the same lenders, up 9.7% compared to February 2017.

Other secured lending was also hit, with 8, 615 transactions completed in February, down 3.9% on the same month last year. The trade body’s latest monthly lending update also appears to show that much of the growth may be coming from smaller lenders. While the £19bn February figure was a 4.9% overall increase, the high street lenders accounted for just a 1.8% rise in lending to £11.3bn.

Lock-in to rates

UK Finance managing director of personal finance data Eric Leenders said: “There has been an increase in remortgage approvals compared to last year, as borrowers look to lock-in to attractive deals amid speculation of further interest rate rises later this year.

“We are also seeing a continuing rise in credit card spending, reflecting the growing number of transactions carried out using cards, while other forms of borrowing such as overdrafts continue to fall.”

He added: “Meanwhile real wages continue to be squeezed by inflation, impacting on consumer confidence and retail sales. This pressure on household incomes should ease in the coming months, as the effect of the fall in sterling begins to fade and the strong labour market leads to a better outlook for wage growth.”

Lower lending in March?

IRESS principal mortgage consultant Henry Woodcock noted that the year had begun with some positive market indicators and although buy-to-let activity remained subdued, the number of first-time buyers and small deposit borrowers has been on the increase.

“With over 20 lenders increasing their rates in the last few weeks, house prices rising slowly, and the Bank of England signalling a May rate rise, we could see borrowers scramble to secure the best mortgage deals before the anticipated rise,” he said.

“We should also note the latest Royal Institute of Chartered Surveyors (RICS) housing market data, which shows the average number of properties on estate agent’s books hit new lows in February and newly agreed sales also dipped.

“So, it will be interesting to see if this leads to lower lending in March,” he added.

Buy-to-let activity

Just Mortgages and Spicerhaart group operations director John Phillips, agreed that the more significant news was remortgage approvals rising more than 9% in number and value compared to a year ago.

“This will most likely be because there is speculation of further rate rises, so borrowers are looking to lock in low rates now,” he said.

“It could also be to do with buy-to-let changes. Two years on, many of those who acted at that time will be coming to the end of their mortgage deals which could also explain some of the rise in remortgages.

“I think we will also see more activity in buy-to-let sector borrowing in the next week or so, because from April 1, the amount landlords can offset when calculating their tax bill drops from 75% to 50%,” he added.

Source: Your Money

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January remortgaging hit nine-year high

Remortgaging leapt 20% at the start of the year to hit a nine-year high while the number of first-time buyers and home movers both increased over the same period.

There were 49,800 residential remortgages worth £8.9bn completed in January, the highest number since November 2008, according to UK Finance figures.

First-time buyer mortgage numbers also rose, this time up 7% on an annual basis to 24,500 home loans for novice buyers worth £4bn. This is an increase of 11% year-on-year.

The average first-time buyer age is now 30 with a gross household income of £41,000.

On buy-to-let, 5,600 purchase mortgages completed in January, a drop in completions of 5.1% on an annual basis but worth £0.8bn. However, lenders reported 16,500 buy-to-let remortgages, almost 18% higher than the previous year and almost £2.6bn of monthly lending.

Moving home

In January, 25,000 mortgages for home movers completed, worth just over 10% more than a year ago at £5.4bn. The average home mover is 39 with an average household income of £55,000.

Jackie Bennett, director of mortgages at UK Finance, said: “While an increase in remortgaging is expected in the New Year as people put their household finances in order, this strong growth is above the seasonal fluctuations we tend to see at this time of year.

“However, growth in the buy-to-let market remains subdued, reflecting the ongoing impact of recent tax and regulatory changes.”

Brian Murphy, head of lending for Mortgage Advice Bureau, said the data all points to a solid start for the UK property market this year, and buy-to-let remortgaging in particular.

“What this may suggest is that those investors who have decided to stay in the market have taken time to re-trench and garner the appropriate tax advice and are now taking advantage of stock which is becoming available where other landlords are deciding to exit.”

Source: Your Money

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Why London’s buy-to-let landlords should consider remortgaging

Buy-to-let landlords have had plenty of change and financial challenge to endure over the past couple of years, as a series of new laws have impacted on their investment returns. With many coming to the end of the deal period of their buy-to-let mortgage, there could be a wave of remortgage business over the coming months, particularly affecting London.

But is remortgaging affordable and plausible for buy-to-let landlords? The last few weeks have seen conflicting arguments both for and against, underlining the confusing issues facing landlords. The answer lies in each individual’s circumstances and the information they are armed with, when making the decision.

A recent Standard & Poors (S&P) article titled ‘Buy-To-Letdown? Recent RMBS Loans Will Struggle With The Perfect Storm Of Regulation And Tax Hikes’, suggested that, as a result of the Prudential Regulation Authority changes introduced in 2017, many landlords will now struggle to refinance to cheaper mortgage rates, as they will fail to meet stricter affordability tests.

However, that theory has been blow out of the water by a new report, titled ‘Refinancing options are good news for buy-to-let market’, written by Carla Sateriale, manager, buy-to-let at UK Finance.

Sateriale states that the S&P research failed to take into account significant factors that skewed their conclusion.

She wrote: “There are several reasons why we don’t see a substantial jump in loss-making mortgages. The main reason is that throughout 2014, 2015, and 2016, interest rates were driven down by intense competition in the mortgage market. A borrower taking out a 2 year-fix in 2014 could expect to refinance onto a rate around 0.9% lower in 2016. Likewise, borrowers in 2017 could refinance under cheaper deals than were available in 2015. This would have helped cushion borrowers against the higher tax liabilities they would incur starting in 2017.

“We also suspect that the pessimistic view expressed in S&P’s research may be underpinned by the assumption that loans issued in the past several years would be ineligible for refinancing, due to the PRA’s new underwriting criteria. What is often overlooked is that the rules don’t apply to pound-for-pound remortgaging—so as long as there is no additional borrowing, a customer should be able to refinance even if they don’t quite meet the new criteria for stress rates.

“Modelled into these results are several assumptions: that the borrower is a higher-rate tax payer, incurs tax-deductible business costs which amount to 19% of rent, and, until 2018, refinances every two years to a rate in line with typical market rates. In 2017/18 and beyond, it’s assumed that borrowing costs for the landlord increase by 0.25% per year. In line with S&P’s assumptions, rent levels are held constant throughout.

“Eight years of holding rent fixed is a major contributor to the model’s prediction of 15% of 2014-issued mortgages becoming loss-making by 2012/22. In reality, it’s quite rare for PRS rents to be fixed for such a long time.”

Whilst much of Sateriale’s comments ring very true, in theory, maybe in practice it isn’t so easy. This is because, when the investor initially took out their mortgage, they would have been subject to very different affordability calculations than are now in place which means that if none of the capital has been paid off during the interim period, it could be harder to secure finance under the new rules.

However, there are other options available. A specialist buy-to-let broker firm will have the marketplace knowledge and expertise to investigate all avenues to find a solution and may suggest one you have not considered, or been aware of.

Why London could see a surge in remortgage business this year

In the early months of 2016, there was a rush from many investors to secure buy-to-let mortgages ahead of the April 1 deadline, when the new 3% stamp duty surcharge on second properties came into force.

With London property prices significantly higher than elsewhere in the country, that meant that the subsequent stamp duty costs often ran into thousands of pounds more for London purchases.

Little surprise then that so many landlords were keen to secure a purchase, before the added cost became payable.

The surge in buy-to-let business in the run-up to April 2016 was industry-wide. Many of those deals were over terms of two years and consequently, will come to an end in the weeks running up to April 1 2018.

But there are other factors which may shape a landlord’s approach, including the likelihood of further Bank of England base rate increases.

The Bank of England’s Monetary Policy Committee (MPC) has already hinted at possible future base rate increases, following on from the first rise in a decade, last November.

Speculation is rife that another base rate rise could occur as soon as May, although rumours have been proven wrong before. However, MPC members and Mark Carney, the Bank’s Governor, have hinted at the probability of further rates rises to combat the effects of inflation.

Historically such an event has served as a catalyst for the mortgage lenders to hike mortgage interest rates. So many landlords have considered insuring against this risk by remortgaging and locking into a fixed rate product.

With buy-to-let mortgage rates still exceptionally low, many landlords will undoubtedly be considering their options, this is perhaps more pertinent to London, for the reasons already expressed.

The UK Finance article sends a message of reassurance to buy-to-let investors and certainly in the right circumstances, there are good reasons for many landlords to consider remortgaging.

In November 2017, Savills predicted a significant exodus of landlords from the industry over the coming years, as a result of the government’s changes, supposedly making buy-to-let a less attractive investment proposition.

The latest English Housing Survey reported that in 2016-17, the private rental sector was the largest tenure in London, accounting for 4.7 million households. That equates to 20% of the housing market in the capital and 30% of people who live there, are renting privately, as opposed to 19% in the rest of the country.

Making the right decision is not only crucial for the investor, but also for the millions of people who rely on the private rental sector in the Capital and elsewhere in the UK.

The expertise of specialist brokers has a key part to play in navigating the complexities of buy-to-let and could help identify financial solutions which set landlords up for success, at a time when they are needed most.

Source: Mortgage Introducer