Finance Matters

Posts Tagged ‘CML’

Norwich & Peterborough Building Society (N&P) has launched a low rate, low fee mortgage to attract buyers who plan to stay in their property for a longer period of time.

The ten-year fixed rate mortgage offers an interest rate of just 3.99 per cent APR, making it one of the cheapest deals on the market.

It is available to borrowers with 75 per cent loan-to-value ratio and the fee is just £295.

Borrowers will receive a free valuation and either free legal fees for remortgages or £200 cashback.

N&P product manager, Richard Barker, said: “We know that this competitive rate will be welcome news for those who wish to fix for a longer period of time giving them the certainty of what their monthly payments will be for the duration of their loan”.

Earlier this month, Nationwide Building Society launched a two-year fixed-rate mortgage with a loan-to-value ratio of 90 per cent for low-deposit buyers.

Borrowers willing to pay a £900 fee will receive a rate of 5.29 per cent or the mortgage is available with no fee at a rate of 5.69 per cent.

For those with a bigger deposit, a rate of 2.99 per cent is available at 60 per cent LTV with a fee of £900.

Despite the flurry of new offers in the market place providing welcome competition, the Council of Mortgage Lenders (CML) warned that the uncertainty created by the ongoing eurozone crisis makes it difficult to predict how the mortgage market will develop in 2012.

In December 2011 gross mortgage lending totalled £11.7bn, 12 per cent higher than December 2010, but a 12 per cent decline compared with the previous month.

Some analysts are predicting that house prices could fall by up to 10 per cent in 2012.

December marked the fifth consecutive month of year-on-year growth in mortgage lending, with a 12 per increase, according to the Council for Mortgage Lenders (CML).

Gross mortgage lending in December was an estimated £11.7 billion, while for the whole year it totalled £140 billion, £2 billion higher than the CML’s expectations.

December’s figures represent a 12% drop from November 2011, but this was partly due to the smaller number of working days in December.

November’s figures were also boosted by a substantial increase in the number of house-buyers taking up fixed-rate deals

In a strong end to the year, mortgage lending for the final quarter of 2011 totalled £37.3 billion, a year-on-year increase of 11 per cent.

However in the face of continuing economic uncertainty, a weak 2012 first half is expected for the housing market, with demand from buyers slowing as lenders increase mortgage rates.

Bob Pannell, the CML’s chief economist, said: “The closing months of 2011 saw stronger mortgage lending activity and housing transactions, despite the fact that short-term economic prospects are challenging.

“There is a glimmer of light ahead for households in that real incomes could stabilise and perhaps even start rising by the end of the year.

“But, continuing eurozone problems mean that mortgage funding prospects are uncertain, so overall UK mortgage market conditions for the year ahead remain difficult to call.”

The CML is also reminding property owners that they should take out rent protection insurance, as the ongoing economic uncertainty is expected to lead to an increase in repossessions.

Rising unemployment and other pressures on incomes are likely to see more people falling in arrears with their rent and mortgage payments in 2012, the CML warned.

Rent protection insurance protects a landlord for a specified length of time if a tenant is unable to pay the rent.

The FSA’s report into lending, due to be published next week, is expected to include proposals to help home owners in negative equity.

The Council of Mortgage Lenders estimates that one in 12 homeowners are in negative equity, with their home now worth less than the price they paid for it, making it impossible for them to move house.

This can be a serious problem for growing families or for people who need to move because they have secured a new job outside their area.

Under the FSA’s new guidelines, homeowners would be able to remortgage to buy another property without having to immediately pay off the balance they owe on their current home.

In effect, this would mean they could move their negative equity to their new mortgage.

However, it is believed that this option may only be open to homeowners who have kept up to date with their mortgage payments.

It is hoped that relaxing the rules would ease the current shortage of first-time buyer properties and help to get the housing market moving again.

The FSA’s report, which follows a two-year inquiry, is also expected to include some tougher regulations on lending, designed to stop a repeat of the lending practices that led to the credit crunch in 2007.

Before the financial crisis, it was easy for house purchasers to borrow up to 125 per cent of the price of the property; in contrast buyers now usually face a minimum mortgage deposit of 5 per cent, while deposits of up to 20 per cent are not unusual.

In related news, Datamonitor’s latest research suggests that gross annual mortgage lending will fall from an estimated £138.5 billion in 2011 to just £127 billion in 2012.

However, gross mortgage lending is expected to increase in 2015 to £182 billion.

The research also suggests that more people will consider building their own properties, with mortgage advances for self-build properties expected to increase by 141 per cent, from £790 million in 2011 to £1.9 billion by 2015.

The Council of Mortgage Lenders (CML) expects the number of house repossessions to increase by 21.6 per cent from 37,000 this year to 45,000 in 2012 due to an increase in unemployment and falling household incomes.

The CML also expects housing transactions to fall next year, with 825,000 homes expected to be sold compared with an estimated 852,000 this year.

This would represent the lowest level of property sales since records began in 1978.

The CML has reduced its forecasts for gross mortgage lending to £138 billion for 2011, from a previous forecast of £140 billion.

It has also cut its forecast for 2012, from £150 billion to £133 billion due to increasing economic weakness.

Mortgage lending, especially to first-time buyers has fallen substantially since 2008, and with banks finding it increasingly difficult to raise funds, the CML warns that it may become even more difficult to secure a mortgage.

The government is hoping its planned mortgage indemnity scheme will help first-time buyers secure mortgages, but reservations have been expressed about how effective it will be.

Bob Pannell, chief economist at the CML, said: “Despite the fact that activity levels have already been subdued for several years, we have pencilled in a broadly flat picture, for both mortgage lending and property transactions, at least until real incomes show signs of stabilising as inflationary pressures recede.”

The latest figures from the Financial Services Authority (FSA) show a 5.8 per cent increase in the number of homes repossessed by lenders, from 9,134 in the second quarter to 9,670 in the third quarter of this year.

However mortgage arrears cases fell by 2 per cent to 34,900 in the third quarter, representing a year-on-year decline of 9 per cent, according to the FSA.

October was a difficult month for first-time buyers according to the latest figures from the Council of Mortgage Lenders (CML).

Ten per cent fewer home loans were offered to first-time buyers compared with September and the average deposit they had to find was a hefty 20 per cent.

In the current economic climate and with many prospective house purchasers living in expensive rental properties, finding this level of deposit is out of reach.

Just 16,400 first-time buyer loans were approved in October.

The total number of home loans approved for all groups fell 8 per cent compared with September, to 44,500.

On a year-on-year basis, home loans were down 5 per cent overall in October, and down 1 per cent for first time buyers.

The CML expects the number of first-time buyers seeking mortgages to increase early next year, as they rush to avoid having to pay stamp duty.

Until 25 March 2012 first-time buyers of residential property can apply for exemption from stamp duty on properties valued at £250,000 or less.

Paul Smee, CML director general, said: “Despite the fall in lending in October, it is possible that we will see signs of increased activity by first-time buyers in the early months of next year, as we approach the end of the government’s stamp duty concession at the end of March.”

The CML also delivered some good news for house purchasers with its figures showing that mortgages are at their most affordable level since 2004.

Although mortgage deposits remain high, monthly interest payments have shown a downward trend.

Mortgage interest accounted for 12 per cent of income in October, its lowest level since January 2004.

The government is trying to help first-time buyers struggling to find high deposits, through a proposed mortgage indemnity scheme.

This aims to encourage lenders to offer mortgages of up to 95% of a property’s value by guaranteeing that they will not lose money if the house-buyer defaults on their mortgage payments.

The government and participating house builders will contribute a certain percentage of a new-build property’s value into a loan guarantee fund through which lenders will be able to recover losses if a property falls into negative equity and is repossessed.