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Mortgage lending continues to rise, says Bank of England

The number of loan approvals for house purchases rose by £1bn in December compared with the previous month to £12.4bn, according to Bank of England figures out today.

This is reflecting what we are seeing in the marketplace. The Government’s Funding for Lending scheme continues to make more money available at cheaper rates to lenders, and this is trickling through to borrowers.

We are also seeing welcome innovation return to the market, which should continue to boost the numbers taking out mortgages in coming months. Clydesdale’s ‘low-start mortgage’ whereby borrowers can take an interest-only loan of up to 80 per cent LTV for the first three years, before switching to a repayment facility, is likely to be popular and imitated by other lenders.

Barclays’ Family Springboard Mortgage, also launched this month, enables parents to offset their savings against their child’s mortgage without actually handing over the funds, enabling the child to buy with just a 5 per cent deposit. More innovation like this will really help boost the housing market.

The private banks continue to be the ‘go to’ option for wealthy borrowers requiring large loans, particularly those with complex income arrangements or who require interest-only mortgages. Those who are asset rich but income poor they also find a solution.

The number of homeowners remortgaging fell slightly in December compared with the previous month which is surprising, given the raft of excellent rates now available. However, the numbers were still higher than the previous six-month average indicating an upwards trend nevertheless. Some borrowers will no doubt be waiting to see whether mortgage rates fall further before taking the plunge and remortgaging – the way things are going, you wouldn’t bet against that happening.

In its Trends in Lending report, the Bank notes that rates on fixed-rate mortgages at lower LTV ratios fell by more than 50 basis points over the second part of 2012 and that some major lenders expected a fall in pricing at higher LTV ratios in 2013. This is already happening, albeit slowly, but is good news for those with more modest deposits.

Borrowers pay off mortgage debt, Bank of England figures show

Figures from the Bank of England show that just over £8bn of the nation’s collective mortgage debt was repaid in the third quarter of 2012.

One of the defining features of the financial crisis has been the difficulty in withdrawing equity from property. It has become much harder as lenders rein back on the maximum loan-to-values they will allow and charge higher rates of interest on smaller equity stakes. With property values falling in many parts of the country, it is proving undesirable to increase the debt against the roof over your head.

The fall in number of people remortgaging is also playing a part as borrowers are not taking the opportunity to increase their mortgage at the same time as taking out a new deal. Low standard variable rates mean many borrowers are content not to remortgage, while tougher criteria from lenders mean many simply are no longer able to do so.

The Bank of England suggests that there is little sign of households paying down their mortgages more quickly than in the past. This indicates that there is a lack of money available to do so, with the high cost of living and rising unemployment paying a part. Where households do have surplus funds there are signs that they are overpaying on the mortgage, particularly as savings accounts are paying such poor rates of interest.

The number of housing transactions is well down on the peak of the market, something we expect to continue into next year as the lack of confidence in the wider economy continues. It will become slightly easier to get a mortgage as the Funding for Lending monies trickle through but many would-be buyers and sellers are more likely to sit tight until circumstances improve.

Interest-only mortgages fall further from grace as interest rates held

There were no real surprises today when the Bank of England announced that interest rates would be held at 0.5 per cent for another month and that there would be no further quantitative easing (QE) – for now. It still looks likely that there will be more QE before the year is out, and even a cut in rates – if you believe some forecasters.

What is surprising is Nationwide’s announcement that it will no longer be lending to new borrowers on an interest-only basis. Existing borrowers on interest only who require further funds won’t be able to get them on an interest-only basis either. However, existing customers on interest only will be able to keep this arrangement going.

This decision is surprising in its severity. Yes, interest only is hardly popular among lenders now, with the majority severely pulling back from it, offering restricted loan-to-values and maximum loan sizes, while reducing the number of repayment vehicles that are deemed acceptable. But not offering it at all to any new customers, not just first-time buyers? That’s an extreme move. Interest only doesn’t suit everyone but as long as the borrower has a genuine repayment strategy in place, why is it an issue for lenders?

It might not be long before the only place you’ll find an interest-only mortgage is a private bank.

Advice is increasingly crucial, whether you have an interest-only mortgage or are on your lender’s standard variable rate (SVR). While interest rates may not have moved this month, Santander is hiking its SVR from 4.24 to 4.74 per cent regardless. This means higher monthly payments for thousands of mortgage borrowers. There might be an opportunity to remortgage if you have enough equity in your home, your earnings haven’t fallen over the past couple of years and you are not on interest only. If not, you may struggle.

Mortgage approvals edge higher

Mortgage approvals edged higher in July, according to the Bank of England with 47,312 loans approved, compared with 44,124 in June. The number of remortgages also rose as homeowners took advantage of some of the excellent rock-bottom five-year fixes now on offer.

Numbers are still down on the six-month average but at least they are moving in the right direction. This should be helped by money market rates falling to all-time lows, which is resulting in some extremely cheap mortgage rates.

Lenders certainly seem to be demonstrating renewed vigour. Accord launched a ten-day mortgage sale on Tuesday, with rates available from 2.99 per cent for a two-year fix and 3.29 per cent for a five-year fix – both available to those with a 30 per cent deposit. Skipton building society has also cut rates and while Nationwide has raised its fixed-rate mortgages, this is more down to wanting to maintain service levels than anything else.

Borrowers should not assume that the mortgage market is dire. There are some excellent deals out there, both from high-street lenders and the private banks. Seek specialist advice to find out what is available to you.

Interest rates held and more QE on the way

There were no real surprises today when the Bank of England announced that interest rates would be held at 0.5 per cent for another month and that a further £50 billion of quantitative easing (QE) would also be pumped into the ailing economy over the next four months.

There has been so much QE now (today’s contribution takes the total to a whopping £375bn) that even commentators in the press have had enough writing about it. There is nothing much left to say: the economy is in the doldrums and there are few other options. Some are calling for yet another base rate reduction but the preferred course of action, for the Bank at least, is to print yet more money.

But it’s the same old story on the mortgage front. While interest rates haven’t moved, some lenders are raising their mortgage rates. ING Direct has announced that from August, borrowers on its standard variable rate (SVR) will pay 3.99 per cent interest, up from 3.5 per cent. It could be argued that ING Direct borrowers still have access to one of the cheapest SVRs, even after the increase. But that is small comfort to those borrowers who are going to have to pay more each month.

Advice is more crucial than ever. We’re just past the halfway point in the year so it’s as good a time as any to take a look at your mortgage and see whether you could do better. Is it possible to remortgage? Would you get a lower rate? Call us for a chat; you might just find that there is a cost-effective option available to you.

Falling inflation and funding for lending set to boost mortgage market

With so many negative stories circulating regarding the economy, and in particular the Eurozone, it is encouraging to finally see a couple of positives. Today’s announcement that inflation has fallen to its lowest level for two and a half years shows that consumers have some respite from soaring prices, as well as strengthening the argument for another round of quantitative easing (QE). So far some £325bn of QE has been pumped into the economy.

The Consumer Price Index (CPI) fell to 2.8 per cent in May, down from 3 per cent in April, according to the Office for National Statistics. This is the lowest level seen since November 2009. The fall in petrol prices was behind the surprise drop.

Meanwhile, the Bank of England announced last week that it would offer £80bn to banks to encourage them to lend to individuals and small businesses, and pump a further £100bn of cheap credit into the UK economy over the next few months.

These moves should mean more money is available for mortgages – great news for anyone looking to take out a new loan or remortgage. It is not yet clear whether there will be a significant increase in funding for those with modest deposits or whether lenders will continue to favour those with sizeable down payments. For this money to make a real difference to the mortgage market, lenders will have to do more lending to those with small-ish deposits.

Swap rates – the money market rates lenders pay to borrow from each other – continue to fall, as it looks increasingly likely that interest rates won’t rise for the next few years. Indeed, a rate cut could actually be on the cards, which will again be welcomed by borrowers on variable rates.

On balance, these latest developments are encouraging for borrowers. But, as ever, it is important to seek advice before taking the plunge by speaking to an independent mortgage broker, particularly if you have complicated income streams or an unusual property.

Rising mortgage rates and service issues: why you need a broker

The Bank of England has voted to keep interest rates at 0.5 per cent for another month. This is not surprising; indeed, it is widely expected that Base Rate – which has been static for more than three years – won’t rise for another couple of years at least.

Yet while interest rates haven’t moved, mortgage rates are on the rise. A handful of lenders, including Halifax, have raised their mortgage rates in the past week, following lenders such as Clydesdale and Yorkshire Banks increasing their standard variable rates earlier this month. Interest-only criteria continues to tighten, making it increasingly difficult for those with bonus-driven incomes to secure funding.

Service issues at certain banks are also causing problems for borrowers. We have seen a significant increase in buyers coming to us in desperation because their mortgage offer is taking so long to process that they are in danger of losing the property they are trying to purchase. When there is a dearth of desirable properties on the market, this is a disastrous situation for a buyer to find themselves in. Some lenders are taking several weeks just to get an offer out because they have been inundated with demand for their ‘best buy’ deals or have restricted their conveyancing panel. But this is too slow for many.

However, Anderson Harris can help steer clients in the direction of lenders who aren’t experiencing service issues. We can assist with getting funding arranged at relatively short notice and we know the private banks to approach for the right sort of client who needs interest-only.

These are difficult times when it comes to borrowing but there are often solutions if you know where to look. Advice is more crucial than ever.