Finance Matters

Posts Tagged ‘Council of Mortgage Lenders’

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.

House sales fell 1 per cent in 2011, with just 869,000 residential properties sold, according to HM Revenue and Customs (HMRC).

In January 2011, traditionally the weakest month for property transactions, just 45,000 houses were sold.

However, the market did improve at the end of the year, with 76,000 sold in December.

The property market has been in a slump for the last three years, with high inflation, high unemployment and stringent lending criteria making it impossible for many people to afford to buy their first home or move house.

Many first-time buyers are unable to raise the high deposits demanded by mortgage lenders, leaving them trapped in expensive rental properties.

Property sales in 2011 were around 50 per cent lower than they were in 2007, prior to the onset of the credit crunch and were nearing the record low level of 2009, when just 848,000 homes were sold.

The Council of Mortgage Lenders expects total lending to fall again in 2012, suggesting a further fall in house sales is likely.

Official figures released last week by the Department for Communities and Local Government (DCLG) revealed house prices fell by 0.3% in the year to November 2011.

The average UK house price ended the year at £205,796.

However, house prices increased by 0.7 per cent for first-time buyers and the price of new properties increased by 7.7% on average, compared with 2010.

The DCLG’s figures also indicated that the North/South divide in house prices is widening, with the North West experiencing the largest fall in property prices while the smallest was in the South East.

High inflation and rising unemployment are expected to lead to a substantial increase in home repossessions this year.

The Council of Mortgage Lenders expects a 22 per cent rise in repossessions in 2012 to 45,000.

HSBC has announced plans to lend more than £15 billion in mortgages this year, with £3m of this ring-fenced for first-time buyers.

This should provide mortgages for up to 150,000 home buyers during 2012, including 27,000 people buying their first home.

The sum amounts to 11 per cent of all the mortgage borrowing predicted for 2012 and represents HSBC’s biggest ever share of the mortgage market.

Martijn van der Heijden, head of lending at HSBC, said that the promised investment “demonstrates HSBC’s commitment to continuing to help people move up or indeed take the first step on to the housing ladder.”

Although analysts have suggested that the economic downturn will cause lenders to tighten their mortgage criteria, HSBC said it had no plans to do so.

Its promised investment will come under its current lending strategy which is designed to ensure that new lending is in the best interests of customers and shareholders, the bank said.

The latest Bank of England Trends in Lending report suggests that there will be an increase in first-time buyer mortgage deals in the first quarter of 2012.

This will help borrowers with high loan-to-value ratios and could allow prospective buyers who are currently trapped in rental properties, to purchase their first property.

The first-time buyer share of the market has improved slightly since autumn 2011, when it hit its lowest level for nearly three years.

The latest data from the Council of Mortgage lenders reveals that first-time buyers took out 17,300 loans, worth £2.1bn, in November 2011, a 4 per cent increase by volume and 5 per cent by value compared with the previous month.

The withdrawal of the stamp duty concession in March is expected to help fuel an increase in first-time buyer activity in the first quarter, with prospective home owners hurrying to purchase their first property before the deadline.

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.