Blog Archives

BBA: Gross mortgage lending rises in June


Gross mortgage borrowing rose to £8.9bn in June, according to the British Bankers’ Association (BBA), better than May’s figure and above the six-month average.

The mortgage market continues its upward trajectory with borrowers tempted to take the plunge by lower rates and easing criteria. Help to Buy has got off to a flying start in its first four months, according to house builders, and is expected to give first-time buyers as well as second steppers, a boost from January when the guarantee element of the scheme is rolled out.

We expect mortgage rates to continue to be extremely competitive in coming months as a result of Funding for Lending and lenders continuing to vie for business.

Borrowers who can afford to do so continue to overpay on their mortgages, taking advantage of record low interest rates, and pay down debt where they can. This makes sense – why leave savings languishing in accounts paying such poor rates of interest when you can reduce your borrowing? There is also a reluctance to take on extra borrowing because of the uncertain economic and jobs climate. Confidence may be improving but it still has some way to go.

While lending volumes continue to improve each month, we remain some way off a sustained recovery in the housing market as caution continues to prevail.

Adrian Anderson
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Adrian Anderson

Outlook good for mortgages as market continues to grow


The Bank of England yesterday said that mortgages are getting cheaper and banks are issuing more of them, a trend lenders expect to continue in coming months. In its quarterly Trends in Lending report, the Bank said that increased consumer confidence and cheap funding costs as a result of Funding for Lending are combining to boost the housing market.

Lenders are clearly demonstrating an increased appetite to lend and are having to do so at higher loan-to-values if they wish to compete.

Those who can afford to, continue to overpay on their mortgages – a sensible strategy when you consider that interest rates won’t stay low forever.

While there is more choice of mortgages at higher loan-to-values, with property prices continuing to rise in parts of the country, particularly London and the south east, the question is whether this is going to hamper the number of first-time buyers who are able to get on the housing ladder. Although lenders reported that they felt house prices would be little changed or increase slightly in coming months, there remain fears that Help to Buy will fuel a house-price bubble as the lack of new homes being built is not being addressed.

Jonathan Harris
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Jonathan Harris

‘Forward guidance’ and why rates not rising anytime soon


The Monetary Policy Committee (MPC) today voted to hold interest rates at 0.5 per cent for another month and to maintain the size of its programme of asset purchases at £375 billion. But what was really interesting about the first meeting under new Governor Mark Carney was that the MPC also told the financial markets that they were wrong about the likely timing of any rise in interest rates.

The statement which accompanied the rate decision gave the clearest indication yet that rates will not be rising anytime soon. This will reassure borrowers who may have been concerned that the fluctuating Swap rates seen last week meant that mortgage rates would be rising sooner rather than later.

The Bank of England said that while there are signs of a recovery in the UK, it ‘remains weak by historical standards and a degree of slack is expected to persist for some time’. So what does this mean? Well, in the Committee’s view ‘the implied rise in the expected future path of Bank Rate was not warranted by the recent developments in the domestic economy’. In other words, bond yields have risen too high in recent weeks on the back of fears that the US was about to slow its stimulus programme, and that the UK would follow suit.

The Chancellor of the Exchequer had asked for such ‘forward guidance’ ahead of the Committee’s August meeting, whereby it would inform the markets that it intends to keep interest rates at 0.5 per cent for a certain period of time. Governor Carney has decided to introduce this transparency ahead of next month’s meeting, which bodes well. .

As far as mortgages are concerned, while one or two lenders rushed to pull products on the back of rising Swap rates – with a view to repricing higher – attractive rates continue to be introduced. For example, one lender is launching a lifetime tracker tomorrow, pegged at 2.19 per cent above base rate, giving a pay rate of 2.69 per cent. There is just a £495 fee and it is available to those with a 25 per cent deposit.

There are plenty of other competitive rates available. Get in touch for more details.

Adrian Anderson
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Adrian Anderson