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UK gross mortgage lending showing signs of picking up
Mortgage lending in the UK is still down on a quarterly basis on what it was a year ago but there are signs of a pickup, according to the latest figures to be published. Estimates from the Council of Mortgage Lenders shows that gross mortgage lending reached £16.5 billion in March, some 21% higher than February but lending for the first quarter is 12% down on the final quarter of 2014 and 3% down on the first quarter of 2014. However it is up month on month for the month of March, some 7% higher than March of 2014 and CML chief economist Bob Pannell said that the underlying lending picture is stabilising. ‘Sentiment and activity are showing early signs of improvement, and should be further supported by the effects of stamp duty reform. We expect to see lending strengthen over the next few months, albeit from a relatively sluggish start in 2015,’ he said. But buy to let lending is stronger. Data from the Bank of England shows that gross lending for buy to let purposes was £27.4 billion in 2014 and over the past five years the share of total buy to let lending in overall mortgage lending picked up to 15% in the fourth quarter of 2014 Q4, higher than in the pre-crisis period. The Bank’s network of Agents noted that the rental market had continued to grow strongly in recent months, supporting continued steady growth in buy to let activity and gross buy to let lending has grown faster than overall gross mortgage lending in recent years. Gross buy to let advances for remortgaging have also increased in recent years. As a share of the total it grew from 32% in 2002 to 52% in 2014, with the share of gross advances for house purchase at 45%. According to David Whittaker, managing director of Mortgages for Business, buy to let is not subject to the nerves and jitters of this spring’s home owner mortgage market. ‘Election uncertainty might be putting some people off buying a home, but in the meantime millions of tenants still need somewhere to live and landlords are investing in new properties, as buy to let mortgage rates reach new lows,’ he said. ‘Underpinning this, rents are picking up on the back of a strengthening jobs market, supporting yields while steady price growth is still providing an additional bonus of capital growth to many landlords,’ he explained. However he pointed out that there are uncertainties on the horizon. ‘The latest noises from the Bank of England indicate how the powers that be seem as unsure about the future path of interest rates as the man on the street. However, when rates do rise, or if the economic recovery does slow, landlords will be in a better position to stand up to headwinds than a year ago as their tenants’ financial health improves,’ he added. In general the mortgage lending market is improving, according to… Continue reading
Election uncertainty and higher taxes affecting prime London property market
Higher taxes and election uncertainty have put the brakes on prime London house prices which fell by 0.5% in the first quarter of 2015, new research shows. This follows an average 2.6% downward price adjustment in the final quarter of 2014 that was triggered by the stamp duty reform announced in December’s Autumn Statement, according to the analysis by real estate firm Savills. It means that the 12 month rolling average for house price growth in the prime London market has now slipped into negative territory. ‘As we forecast in November, uncertainty regarding the general election and the potential for further taxation of high value property have contributed to a subdued market in the first part of 2015,’ the report explains. ‘The prime central London housing markets, that have been most affected by increased stamp duty charges, are looking fully taxed. This has meant sellers are typically having to factor in price adjustments equivalent to the stamp duty increase. Consequently, in central London values are down 4.3% year on year,’ it adds. The study shows that the markets of prime south west London have been similarly, but less significantly, affected. Buyers have become increasingly aware of the high cost of moving, which has tempered demand in the higher value parts of that market. By contrast, the markets of Islington, Wapping and Canary Wharf continue to show positive annual growth, despite a general sentiment-led easing in values in the past six months. ‘In part, this reflects the fact that lower tiers of the prime market have remained the most robust, with the market below £1 million generally benefiting from the stamp duty changes and unaffected by the political focus on taxation,’ Savills says. ‘Interestingly, the softening in the London markets has corresponded with a pick-up in the number of Londoners circling the country market. Prices of homes below the £2 million threshold in the prime regional markets beyond London continue to show year-on-year price growth, and rose by 1.1% in the first quarter of the year. However, market activity beyond London is still partly constrained by pre-election caution,’ it points out. ‘While the fundamentals of demand and supply remain sound, the short term outlook for the prime property market is heavily dependent on the extent to which the election brings political certainty and whether the sector is subject to further taxation. Certainty will, at least, allow buyers and sellers alike to take account of the impact of any fiscal change, as the all-important autumn market approaches,’ it adds. Savills is forecasting that prices in the prime London market will rise by 22.7% over the five years to the end of 2019 assuming no further taxation of high value property. In this case there would be a relatively swift bounce back in values as was seen in 1998 and 2002, when price falls in central London were contained to less than 5% and recovered lost ground very quickly thereafter. In the event of a mansion tax, Savills… Continue reading
UK mortgage brokers report impact of rules change a year ago
A quarter of mortgage brokers in the UK say they have experienced a decrease in volumes since new mortgage rules came into being almost a year ago, a new survey shows. The self-employed and retirees are the most difficult to find a mortgage for and mortgage intermediaries are very much divided on the impact of the Mortgage Market Review (MMR) on business volumes. The research by Paragon Mortgages that covers the first quarter of sought to establish the impact of MMR in terms of intermediaries’ business levels as we reach the one year anniversary of the changes coming into force. Of the 200 intermediaries who took part in the survey, 43% said that in their view there had been no change to their business volumes as a result of MMR and 24% said that business had increased. However, some 25% of those surveyed said they had experienced a decrease and only 3% said there has been no change in business. The majority of intermediaries who said they had experienced a decrease reported this had been up to 30% and only 14% said the decrease in business had been any higher. Looking ahead, 15% of intermediaries said they did not know what the long term impacts of the new regulations would be. Intermediaries were also asked which of their customers are now the most difficult to find a mortgage for. Top of the list were the self-employed at 75%, followed by retired customers at 52% and 51% said it was those customers with complex incomes. ‘The research shows is there is still some uncertainty in the market about the long term impact the MMR changes will have on business volumes. This isn’t unexpected, as with any significant change in regulation there will always be a period of adjustment, but it is important the industry monitors this carefully,’ said John Heron, director of Paragon Mortgages. ‘Looking at the feedback from intermediaries on the underserved areas of the market also provides a valuable insight into what lenders could be doing better. We need to recognise that there is no such thing as the average mortgage customer anymore, people have a greater variety of circumstances and we need to be more innovative in order to meet increasingly varied demand from customers,’ he added. Continue reading
