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Research shows interest only mortgage numbers in UK are falling
Concerns have been growing in the UK over the number of home owners with interest only mortgages who do not have enough finance to cover themselves when their loan comes to an end. But new research shows that over the past two years the total number of interest only loans outstanding has fallen by over a quarter with a 16% reduction in the number of loans over the past year alone. According to the Council of Mortgage Lenders the progress that has been made and the ongoing steps that are being taken by the industry to check that borrowers with interest only mortgages have plans for how they will repay their loans at maturity is encouraging. As at the end of 2014, CML members reported that there were around 1.9 million pure interest only mortgages outstanding, and around 460,000 part interest only mortgages. This was around 300,000 fewer pure interest only mortgages and 160,000 part interest only mortgages than a year earlier. The CML research suggests that a quarter of this reduction is down to natural attrition, which is loans maturing and repaying at the end of their term. Around a third can be attributed to full redemption of loans not set to mature until at least 2028, suggesting that many borrowers are taking action well before problems could arise. This also suggests that a significant group of borrowers are successfully remortgaging onto full repayment terms without falling foul of new affordability rules. Of those loans that have matured, few have failed to repay. In total, there are fewer than 16,000 loans outstanding which have matured but not yet repaid or restructured and previous experience shows that most such loans subsequently redeem within a relatively few months of maturity. However, the CML said there is no room for complacency and members are continuing to think about the options for customers who may not be able to repay their mortgages. This includes more partnering with third party advice providers, including equity release firms, and product innovations that may help some borrowers. The CML also pointed out that it remains a challenge to get borrowers to respond to lender contact designed to help them plan for their mortgage's repayment at maturity. Lenders contacted around 427,000 interest only customers between April and December 2014, about 17% of all interest only borrowers. During 2014, the focus of lender communications moved beyond those whose mortgages are due to mature by 2020, and included borrowers whose mortgages are not due to mature until after this. Response rates by borrowers varied. Around 27% of those contacted whose mortgages are due to mature between 2021 and 2028 responded but only a disappointing 2% of those whose mortgages are not due to mature until after 2028 did. However, where lenders did succeed in getting customers to respond, 86% of those who responded had a repayment strategy, and those who did not appeared responsive to making changes such as switching to repayment terms,… Continue reading
UK property sales exceed 100,000 for third month in a row
Residential property sales in the UK were at their highest in August for 18 months, according to the latest data published by HMRC. It means that more homes were sold in in August than in any month since February last year with the seasonally adjusted data showing 106,480 transaction during the month. It is the third month in a row that sales of more than 100,000 were recorded, however, sales are still well below the monthly sales of nearly 150,000 seen during the housing boom in 2006. The seasonally adjusted estimate of the number of residential property transactions increased by 3.1% between July 2015 and August 2015 and that is 5.7% higher compared with the same month last year. For August 2015 the number of non-adjusted residential transactions was 7.4% lower compared with July 2015. The number of non-adjusted residential transactions was 1.9% lower than in August 2014. Peter Rollings, chief executive officer of Marsh & Parsons, said that taking into account seasonal adjustment, property sales are going from strength to strength, and showing great improvement from this time last year. ‘With the spectre of higher interest rates being kept at bay, buyer demand is in full swing and summer sales have continued to blossom in August. After slightly fewer home sales than we would expect in a typical July, buyers last month were showing a new enthusiasm and readiness to enter the market,’ he pointed out. ‘The changes to stamp duty are still washing over London and cooling activity at the topmost tiers of the housing market. But overall demand for property in the capital hasn’t waned, as young professionals and first time buyers continue to seek out up and coming areas to put down roots,’ he explained. ‘The subsequent squeeze on available property for sale in the capital should keep pushing house price growth along well into the autumn,’ he added. Continue reading
Households across the UK positive about property price growth
UK house price sentiment remains positive with households in all regions believing that property prices increased in September, the latest index shows. Some 22.5% of households surveyed across the UK said that the value of their home had risen over the last month, while 3.8% said that prices had fallen, according to the index from Knight Frank and Markit Economics. The index, which is a bellwether for house price movements across the country, recorded a reading of 59.3 and has now had a reading above 50 for 30 months in a row. Any figure over 50 indicates that prices are rising, and the higher the figure, the stronger the increase. Any figure below 50 indicates that prices are falling. However there is a north-south divide with the average reading for the north of England in September at 54.9 and the south of England at 64.1. This is the second widest gap between the two readings this year. While households in all UK regions perceive that property prices rose in September, Londoners perceived the highest rate of house price growth over the course of the month, followed by those in the East of England. However, in Yorkshire and the Humber perceptions of house price growth eased notably in September after rising for the previous three months to reach 60.4 in August. While households in the region still perceive that prices are rising, they are reporting that the pace of increases has slowed, with a reading of 54 this month. The index also shows that households in all UK regions expect house prices to rise over the next 12 months, led by households in the East and South East of England while some 5.9% of households expect to buy a property over the next 12 months, while a further 6.4% said that they would purchase a house within one to two years. The future HPSI, which measures what households think will happen to the value of their property over the next year, rose in September to 70 from 69.5 the previous month. However, the future HPSI remains well below its peak of 75.1 achieved in May last year, the report points out. ‘UK price sentiment remains in positive territory, and has stayed broadly stable since the election in May. However the north-south divide is evident, with the average reading for the north of England in September at 54.9 and the south of England at 64.1,’ said Gráinne Gilmore, head of UK residential research at Knight Frank. ‘This is the second widest gap between the two readings this year. Overall, households expect prices to rise over the next 12 months, with eight times as many households anticipating a rise in the value of their home as anticipating a decline,’ she explained. ‘Sentiment is being underpinned by the improving economy, with positive employment data as well as wage growth boosting buyer confidence. At the same time a shortage of stock on the market is serving, in some cases,… Continue reading
