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Mortgage market in Wales looking strong going into 2015, says CML
Mortgage lending in Wales remains driven primarily by lending for house purchase, with first time buyers in particular showing strong year on year growth, according to the latest data from the Council of Mortgage Lenders. In the third quarter, there were 3,300 first time buyer loans in Wales, 18% up on the third quarter of 2013. But in the short term lending to this grow is slowing and was 3% down on the previous quarter. Also, first time buyers in the period borrowed £350 million, unchanged from the previous quarter but 21% up on the third quarter of 2013. There were 3,900 home mover loans in the third quarter, up 11% on the previous quarter and 8% more than in the third quarter of 2013. Total value of these loans was £520 million, up 16% on the second quarter and up 18% on the third quarter 2013. Remortgage lending in the quarter in Wales remained unchanged in volume levels quarter on quarter but down 23% compared to the same quarter in 2013. However, the data also shows that the past two quarters have seen the highest lending volumes by first time buyers since 2007. The CML said that first time buyer affordability has been relatively good in Wales compared to the UK, with first time buyers typically borrowing 3.23 times their gross income, which was unchanged from the second quarter but less than the UK average of 3.41. The typical loan size for first-time buyers breached the £100,000 mark for the first time in Wales since 2007, totalling £100,800, up from £99,000 in the second quarter. The typical gross income of a first time buyer household was £31,868 compared to £30,484 in the second quarter. The relatively low level of interest rates saw first-time buyers' monthly payment burden remain relatively low in the third quarter at 18.2% of gross income being spent to cover capital and interest payments, a smaller proportion of income than the 19.6% UK average and unchanged from 18.2% in the second quarter. Lending to home movers, unlike first time buyers, saw an increase quarter on quarter in Wales. Home mover affordability improved fractionally, with home movers typically borrowing 2.79 times their gross income compared to 3.41 for the UK overall and 2.82 in the second quarter. The typical loan size for home movers was £121,599 in third quarter, up from £117,995 in the previous quarter. The typical gross household income for home movers was £46,001 in third quarter compared to £42,247 in second quarter. Home movers' payment burden remained relatively low in Wales at 17.5% of gross income being spent to cover monthly capital and interest payments, less than the 18.8% UK average and 17.2% seen in the second quarter. Remortgage lending in Wales totalled 3,100 loans advanced in the third period of 2014, unchanged from the second quarter, but down 23% compared to the same quarter in 2013. These loans totalled £340 million in value, an increase of 6% quarter on quarter but down… Continue reading
UK estate agents report a better balance between buyers and homes for sale
A better balance between the number of homes for sale and the number of registered home buyers in the UK is emerging, according to the latest report from the National Association of Estate Agents. The October Housing Market survey found that member agents reported an average of 53 properties for sale per branch, some 15% higher than the monthly average for the rest of 2014. It is the highest number recorded on books since October 2013 and compares with an average of 51 properties was recorded per branch in September. While supply showed signs of an increase, the number of house hunters registered per NAEA member branch fell, from 406 in September to 380 in October, easing the balance between the number of available homes and demand. The survey data also shows that the average number of homes sold during the month remained static on September figures, at average of nine sales per NAEA member branch. The number of first time buyers recorded fell, down 6% in October compared to the previous month’s figures, to 24% of total sales from 30% of total sales in September. ‘There is a better balance emerging between the level of demand and supply, as the number of registered house hunters falls for October, while the average number of available properties registered per branch rises to accommodate those looking to buy,’ said NAEA managing director Mark Hayward. ‘However, both supply and demand is still seasonably low for October. The decrease in buyer demand and in particular the decline in first time buyers, along with a relatively static sales market, could be a direct result of the stricter lending criteria which came into play six months ago at the end of April this year, making it harder for house hunters to access mortgage finance. This has certainly been reported as one possibility by our NAEA member branches,’ he added. When asked if the new MMR rules had led to a direct decrease in the overall number of home buyers since it was introduced six months ago, some 79% of NAEA member branches agreed it had affected the current number of buyers. With the exception of September 2014, in which 406 home buyers were recorded on average per branch, the number of house hunters registered per member branch had shown a decrease on figures recorded in April 2014 when it was 392 home buyers in the month MMR was introduced. NAEA member branches also said they believed the MMR had particularly affected demand among first time buyers with 70% of member branches reporting the implementation of MMR had led to a decrease in the number of first time buyers since it came into force. ‘First time buyers will be especially more cautious about making a purchase due to the stricter lending criteria now in place, which makes it harder to secure finance,’ explained Hayward. ‘In addition, prospective… Continue reading
Non standard UK home borrowers face lack of clarity on mortgages
Fears of a future clampdown by regulators are preventing mortgage lenders from offering loans that stretch into people’s retirement, according to a new report. The report from the Intermediary Mortgage Lenders Association examines the impact of post financial crisis mortgage regulation on the growing army of ‘non-standard’ customers who fall outside the traditional core of salaried borrowers with no credit blemishes who can pay off their loans before a set retirement date. IMLA argues that people seeking a loan which is likely to remain outstanding beyond their normal retirement age are suffering from a lack of clarity in the Mortgage Market Review (MMR) rules, which is resulting in older borrowers being frozen out. Most private sector employees now hold defined contribution (DC) pensions, which often prevent accurate predictions of their pension income making it hard for lenders to determine how affordable a loan may prove beyond the point of retirement. With the MMR requiring lenders to ensure mortgages are affordable for the lifetime of the loan in order to ‘protect borrowers from themselves’, the scope for interpretation has convinced many lenders that lending into retirement now carries extra risk if borrowers find at a later date that their retirement income disappoints. In response, many mortgage lenders have imposed lower maximum age limits rather than risk future accusations of breaching the rules where customers’ pensions prove insufficient to keep up their mortgage repayments after they retire. With house prices rising faster than incomes, many borrowers are not managing to purchase an appropriate family home until their forties or even fifties. But anyone over the age of 40 is seeking a loan with a standard term of 25 years will be borrowing beyond a normal retirement age of 65 and is liable to find their options restricted. IMLA argues the upcoming thematic review of the MMR by the Financial Conduct Authority, which is set to examine responsible lending in the first half of 2015, must provide extra clarity so that lenders can offer the flexibility required to meet borrowers’ changing needs without fear of future censure. ‘This issue goes beyond the transitional arrangements for existing borrowers, and means that efforts by the lending community to follow the spirit of MMR with new customers are being hampered by the very real concern that it may be cited against them in future,’ said Peter Williams, executive director of the IMLA. ‘Uncertain pension incomes make it difficult for lenders to assess mortgage affordability in later life, and this may become even harder when the new pension freedoms take effect next year. To avoid a situation where regulation brings about the extinction of mortgage terms that stretch into retirement, we need clarity and confirmation about where the boundaries of responsible lending truly lie,’ he explained. ‘MMR has been a big step forwards but having put a strong framework in place for the future, attention must now… Continue reading
