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UK remortgage figures up in May, but uncertainty could now creep in
Last month was the best May for remortgaging since 2008 but uncertainty and volatility are now expected following the decision by the UK to leave the European Union. Remortgaging reached £5 billion in May and the number of loans reached 32,334, higher than every May since 2008, when 77,100 loans were approved while the average amount of equity withdrawn reached £33,600, the highest amount this year and 43% up from the previous month. However, despite record low interest rates, borrowers felt the pinch due to falling incomes, according to the research from LMS. Remortgage lending was up by 26% compared to May of last year but was down by 16% from April, which was an exceptional month for remortgaging. The number of remortgage loans also decreased month on month by 7% from 34,800 in April to 32,334 in May but this is 31% more than May 2015 when 24,700 borrowers remortgaged. The average amount of equity withdrawn per customer from remortgaging activity has risen by 43% month on month, from £23,479 in April to £33,691 in May. The average amount of equity withdrawn is also up by a quarter in comparison to May last year when equity withdrawn stood at £26,863. The total amount of equity withdrawn rose by 33% over April from £817 million to £1089 million in May, some 64% more year on year from the £664 million recorded in May 2015. This is also the highest amount of total equity withdrawn since May 2008, back when remortgagors withdrew almost £1.21 billion. Despite being the lowest interest rate on record, however, average household income fell from £50,000 in March to £44,898 in April. A drop of 10%. The household income recorded in April 2016 is also 1% lower than in April 2015, when income was recorded at £45,365. ‘Remortgaging witnessed its best month of May since 2008, although the numbers are slightly down following a rush to remortgage in April. The favourable mortgage market, with eagerly competitive lenders, record low rates and rising house prices provided the ideal background remortgaging to continue its year on year surge,’ said Andy Knee, chief executive of LMS. ‘We will have to wait and see what the impact of June’s Brexit decision on the housing and mortgage markets will be in the short and medium term. There will be some uncertainty and volatility to cope with as everyone absorbs the news and this is likely to put a dampener on the housing market at least until the autumn,’ he pointed out. ‘However, interest rates remain at historically low levels and for those with a mortgage now is a great time to take out a fixed rate and stabilise their financial outgoings. Lenders may well come under pressure and their appetites for new business may shrink in the short term. If they do, the range of excellent rates available today might not be around… Continue reading
Easier monetary policy could weaken Brexit effect on UK real estate
The hit to UK real estate sentiment that many experts predict will be sparked by the vote to leave the European Union may be limited by easier monetary policy, it is claimed. While uncertainty in the run up to the referendum had little effect on domestic real estate pricing this year, investment activity slowed but an analysis report suggests that this hasn’t been exclusively caused by Brexit fears but largely reflects greater investor caution as the market reaches the top of the cycle. However, according to Chris Unwin, head of global research at Aviva Investors, the vote to leave suggests there is now little hope of any bounce in sentiment. ‘Indeed, it may be many years until we have clarity on the UK’s constitutional arrangements and trading agreements,’ he said. He pointed out that the financial markets’ reaction to the vote was swift and dramatic with Sterling falling to its lowest against the US dollar in over 30 years and 10 year gilt yields reaching a record low. And, as equities plunged, real estate shares were particularly badly hit. He believes that mounting fears of an economic shock and in the short term, uncertainty as to the UK’s constitutional arrangements and trading agreements, will dampen activity and may trigger a recession by the end of 2016. In the longer term, the economy is likely to be impaired by reduced access to European markets and poorer demographics, weakening the UK’s fiscal position and potentially damaging productivity growth. On top of this calls for a second referendum on an independent Scotland will grow and great further uncertainty. ‘Domestic capital values now look likely to decline moderately over the remainder of the year. It is worth noting, however, that some commentators believe Brexit will hit real estate returns, and the economy, more severely. By contrast, we had expected to see a slight increase in capital values over coming months had the UK voted for the status quo,’ explained Unwin. He expects to see prolonged illiquidity in real estate markets pending renegotiation of international agreements and transaction activity to be low while heightened risk aversion will reflect lower growth expectations and political risk. ‘To compensate, some widening in yields is probable. Secondary assets are likely to be hit even more,’ he added. However, Sterling depreciation could support demand from overseas investors but Unwin pointed out that this needs to be balanced against the UK real estate market’s diminished ‘safe haven’ status along with additional caution in Scotland resulting from pressure for a further independence referendum. Unwin thinks UK occupier markets could be affected significantly less than investment markets. ‘In the short term, a rapid deterioration in the labour market is not expected. Demand for space is not set to fall rapidly,’ he said. ‘If the weakness of sterling is maintained, UK retailers could be hit, particularly those operating on low margins. On the other hand, it may boost prospects for markets dependent on tourist spending, like prime central… Continue reading
Research reveals how student debt is affecting the US housing market
New research suggests that the vast majority of would be first time buyers in the United States believe they can’t afford to buy because of student debt. Some 71% of non-homeowners repaying their student loans on time believe their debt is stymieing their ability to purchase a home, and slightly over half of all borrowers say they expect to be delayed from buying by more than five years. The survey from the National Association of Realtors (NAR) and SALT, a consumer literacy programme provided by American Student Assistant, also revealed that student debt postponed four in 10 borrowers from moving out of a family member's household after graduating college. Nearly three-quarters of non-homeowners polled in the survey believe their student loan debt is delaying them from buying a home. Broken down by each generation and debt amount, the percent share is the highest among older millennials approximately aged 26 to 35 at 79% and those with $70,000 to $100,000 in total debt. Regardless of the outright amount of student debt, more than half of non-homeowners in each generation report that it's postponing their ability to buy. The survey, which only polled student debt holders current in their repayment, yielded responses from borrowers with varying amounts of debt from mostly a four year public or private college. Some 43% of those polled had between $10,001 and $40,000 in student debt, while 38% had $50,000 or more. The most common debt amount was $20,000 to $30,000. Lawrence Yun, NAR chief economist, said that the survey findings bring to light the magnitude student debt is having on the housing market and the budget of even those financially able to make on-time payments. He pointed out that while obtaining a college degree increases the likelihood of stable employment and earning enough to buy a home, many graduating with this debt are putting home ownership on the backburner in part because of the multiple years it takes to pay off their student loans at an interest rate that's oftentimes nearly double current mortgage rates. ‘A majority of non-home owners in the survey earning over $50,000 a year, which is above the median US qualifying income needed to buy a single family home, reported that student debt is hurting their ability to save for a down payment,’ he said. ‘Along with rent, a car payment and other large monthly expenses that can squeeze a household's budget, paying a few hundred dollars every month on a student loan equates to thousands of dollars over several years that could otherwise go towards saving for a home purchase,’ he added. Among non-homeowners who believe student debt is delaying their ability to buy, over three quarters, including over 80% of millennials, said their delay is because they can't save for a down payment. Additionally, 69% don't feel financially secure enough to buy, and 63% can't qualify for a mortgage because of high debt to income ratios. Some 52% of those polled expect to be… Continue reading
