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Home lending in Scotland falls in first quarter of 2015
Lending for homes in Scotland decreased in the first quarter of 2015 by 20% compared to the fourth quarter of 2014 and down 1% year on year, the latest data from the Council of Mortgage Lenders shows. These loans reflected lending of £1.7 billion, down 13% compared to the previous quarter but up 15% on the first quarter 2014. First time buyers took out 5,400 loans in Scotland, worth £580 million, down 23% by volume compared to the fourth quarter of 2014 and down 24% by value. Compared to the first quarter of 2014, the number of loans decreased by 7% but the amount borrowed increased by 2%. The CML data also shows that first time buyer affordability changed slightly in Scotland quarter on quarter with first time buyers typically borrowing 2.86 times their gross income, less than the 2.9 income multiple in the fourth quarter 2014 and less than the UK average of 3.37. The typical loan size for first time buyers was £94,795 in the first quarter, down from £97,200 in the previous quarter. The typical gross income of a first time buyer household was £33,499 compared to £33,965 in the previous period. There were 6,700 loans to home movers valued at £1.1 billion, down 17% in volume and down 6% in value compared to the fourth quarter 2014. Compared to the first quarter of 2014, there was an increase of 5% in volume and an increase of 24% by value. Seasonal factors play a part in the lull commonly seen in lending activity during in the beginning of the year, according to Linda Docherty, chair of CML Scotland. ‘What is encouraging is that home movers have been increasing year on year and first time buyer and remortgage levels are relatively consistent with last year,’ she said. ‘It is likely that we will see an upward trend in lending moving forward as we approach the summer months. The introduction in Scotland of the Land and Buildings Transaction Tax will mean the majority of new borrowers paying less tax, which should also provide a boost to the market,’ she explained. She also pointed out that while overall loan numbers are relatively on par with last year, the value of this lending has climbed 15% as the value of Scottish homes continues to rise. ‘Now that the Land and Buildings Transaction Tax has come into force, buyers will be looking to capitalise on the new savings on offer, as well as competitive loan rates. Combined with the lenders’ appetite to lend, this should assist the housing market bounce back post-election as we enter the summer months,’ she added. Christine Campbell, managing director of Your Move Scotland, also pointed out that lending in the opening three months of the year is typically lower as the mortgage market is more lethargic before getting back into a rhythm. ‘In light of that, and despite having to negotiate an unpredictable general… Continue reading
Survey reveals confusion over UK new mortgage rules one year on
Some 45% of people who planned to buy a property since the introduction of the UK Government’s new affordability rules last year have failed to do so, new research has found. And many feel less in control of securing a mortgage as the new Mortgage Market Review (MMR) introduced a year ago has created confusion, according to the research from Experian. A quarter claim that the MMR has impacted their ability to buy a property, while 37% report that the changes have made them feel less in control of securing a mortgage. The research also suggests that among those who were unable to buy since the introduction of the MMR, many still appear to be overlooking the basics in financially preparing to apply for a mortgage. For example, 46% have never checked their credit report, meaning they have no indication of how a lender might view their ability to repay money. ‘Preparation is the key to successfully navigating the mortgage market post-MMR. Understanding the affordability rules and how a lender makes their decision is the key to success,’ said James Jones, head of consumer affairs at Experian. ‘But it can take time to build a positive credit history and a solid track record of positive money management, so it’s important you start preparing as soon as you make the decision to buy,’ he added. The research also found that 62% were not aware that lenders may require bigger deposits, 23% believed they could apply for mortgages with smaller deposits than before while 37% didn’t recognise that lenders would now be more careful on whether they could afford repayments and 15% mistakenly believe that lenders have now relaxed their lending criteria as a result of the MMR. Some 13% do not know how much money they have left over at the end of the month, 18% don’t even know what monthly repayments they can afford, 14% did not have a big enough deposit for the property they wanted and 12% were unable to secure the size of mortgage they needed. Experian said it was concerned that 11% of those who were unsuccessful did not know why or haven’t asked their lender, leaving them at a significant disadvantage when it comes to improving their chances of being accepted in the future. Guy Shone, from Explain the Market, said that it seems many people remain stuck in a bit of a muddle.’ More needs to be done in 2016 to encourage personal financial planning and properly support aspiring home buyers, so that all buyers fully understand the rules of the game and stand the best chance of securing a property they can afford,’ he explained. Continue reading
Two thirds of UK landlords now planning to buy new properties
Landlords in the UK are looking to expand their property portfolios at an accelerated pace over the rest of 2015, according to a new property investor survey. Some 65% of UK landlords plan to buy at least one further property in the next six months up from 55% looking to buy six months ago, says the research from specialist buy to let mortgage broker Mortgages for Business. . Just 8% of landlords currently plan to sell any property, while 27% do not intend to either grow or reduce the size of their property portfolio over the next six months. ‘Landlords are better capitalised and now more confident about reinvesting. A strong rental market is being driven by tenants moving to make the most of job opportunities, and now gradually starting to earn more too,’ said David Whittaker, managing director at Mortgages for Business. ‘That new surge of demand is putting more upwards pressure on rents, and landlords are only just beginning to supply more homes to let in response. On top of this, after the surprise stability of a majority government, landlords will almost certainly see a short term boost of house price growth while the threat of damaging regulation has been lifted for at least the next five years,’ he added. When choosing how to finance borrowing, landlords are also changing their approach. Some 26% would currently prefer a variable rate deal for a new buy to let mortgage, up from 23% in November 2014. However, choosing to fix repayments for just a short time period is actually slightly less popular than six months ago. Currently 22% prefer a two year fixed rate mortgage, down marginally from 23% in November, while 12% would go for a three year fix, down from 15% in November. Some 30% would still choose the safety of fixing their mortgage repayments for five years, though this is also slightly down on 31% in November. By contrast, very long term fixes appear to be gaining popularity and 10% would now choose a 10 year fix, more than the 8% recorded in November. Landlords’ average loan to value ratios have fallen in the space of the last six months. Overall, the average overall LTV ratio for UK landlords now stands at 54%, down from 57% in November. The proportion of landlords with overall borrowing above 75% LTV has fallen to just 12%, down from 16% in November. The vast majority have some borrowing, though below 75% LTV. This now represents 81% of landlords, up from 79% in the previous survey. Currently only 6% of UK landlords have no borrowing whatsoever. ‘Over the medium term, interest rate expectations have never been friendlier to landlords. This is clearly reflected in the proportion willing to eschew guaranteed stability in favour of some immediate savings. Over a two year period this may be rational, and landlords as a whole don’t tend to take extraordinary risks with their financial position,’ said Whittaker. Continue reading
