Finance Matters

Posts Tagged ‘Mortgage News’

The Bank of Ireland has become the latest lender to increase the standard variable rate (SVR) on its mortgages.

Around 100,000 UK customers will be affected when the bank increases the SVR from 2.99 per cent, to 3.99 per cent in June

There will be a further increase in September, when the SVR will rise to 4.49 per cent.

This will mean that customers with a £100,000 repayment mortgage on an SVR rate will have to pay an extra £81 per month.

It is the first time the Bank of Ireland has increased its SVR since August 2007.

Several lenders have increased their mortgage rates following an increase in the cost of mortgage funding.

Traditionally, lenders set their SVR rate at around 2 per cent above the Bank of England base rate which has been around 0.5 per cent for the past three years and is likely to remain at this low level for the foreseeable future.

Rock bottom interest rates have meant good deals for mortgage holders, but Libor, the rate at which banks lend to each other, recently rose to its highest level for two years, prompting the increase in SVR rate.

The Halifax is increasing its SVR from 3.5 per cent to 3.99 per cent from 1 May while the Royal Bank of Scotland is increasing its SVR mortgage rates from 3.75 per cent to 4 per cent.

Mortgage experts are advising borrowers to review their mortgage options and look around for better deals.

A recent survey by Legal & General Mortgages found that 35 per cent of borrowers in the UK prefer fixed-rate mortgages to SVR mortgages because of the added security of a fixed-rate product.

Of this 35 per cent, 30 per cent said they would pay between £26 and £50 extra for a fixed-rate product, 24 per cent said they would pay between £1 and £25 more, 13 per cent would pay over £51 and 6 per cent would pay over £70 more.

The MortgageMood survey also found that 55 per cent of respondents currently on a SVR mortgage are still happy with their choice.

Mortgage approvals have reached their highest level since December 2009 according to Bank of England figures.

58,728 home loans were approved in January 2012, a 30 per cent increase from January 2011, following increased activity among first-time buyers.

A two-year stamp duty exemption on properties between the value of £125,000 and £250,000 will end in March, and many first-time buyers are rushing to take advantage of the exemption before it ends.

Buyers have also been attracted by cheaper mortgage deals, with the base rate at a historic low of 0.5%.

Gross mortgage lending totalled £12.8 billion in January, higher than the six-month average.

However, approvals for remortgaging declined slightly to 31,952.

The rise in mortgage approvals suggests that property sales could increase in 2012, although the Council of Mortgage Lenders (CML) warned that there could be a dip in sales after the stamp duty exemption is lifted.

Continued economic uncertainty also makes the outlook uncertain for the property market, with high unemployment and low earnings growth making a house move or first-time purchase unaffordable for many, especially with many mortgages still requiring a high deposit.

The latest figures from the Land Registry show that house prices in England and Wales increased by 1.1 per cent in January.

In related news, the Financial Ombudsman Service (FOS) received more mortgage complaints about the Bank of Scotland than any other bank.

The FOS received 884 mortgage complaints from Bank of Scotland customers between July and December 2011, and upheld 32 per cent of them in favour of the consumer.

Santander UK was the second most complained about mortgage provider, with 515 complaints of which 26 per cent were upheld.

Barclays was in third place, with 458 complaints and 41 per cent upheld.

In total, complaints about mortgages to the FOS increased by 38 per cent.

Gross mortgage lending fell to £10.5bn in January, 12 per cent lower than the total for December.

However the figures represent a year-on-year increase of 10 per cent, the Council of Mortgage Lenders (CML) said.

January was the sixth consecutive month of higher lending compared with the previous year.

Home loan approvals also increased in January, by 30 per compared with January 2011, to the highest level for two years.

“The recent improvement in housing and mortgage market sentiment is welcome,” the CML’s chief economist Bob Pannell said.

“But we should be careful not to overstate its significance, given the very low levels of activity we are starting from and the protracted and difficult economic rebalancing that the UK and other countries have embarked upon.”

Some of January’s upturn was attributed to a rush by first-time buyers to purchase a property before the end of stamp duty relief in March.

The temporary exemption, which meant that homes costing under £250,000 were free from the 1 per cent stamp duty, is being lifted by the government because it is believed to have been ineffective in boosting the first-time buyer market.

The increased number of first-time buyers is expected to push up house sales and has contributed to a rise in prices.

House prices increased by 4.1 per cent in February, according to Rightmove, the fastest increase since 2002.

Miles Shipside, director at Rightmove, said: “The biggest jump in new sellers’ asking prices for nearly 10 years indicates there is pricing power if you are selling the right type of property in the right place where enough potential buyers have access to funding.

“If your local market does not have those characteristics and your price-pump is based on little more than seasonal optimism and an estate agent’s hot air, then be prepared for buyer response to be a let-down.”

The number of properties bought with buy-to-let mortgages increased by 84,000 in 2011 according to the Council of Mortgage Lenders’ latest figures.

In the final quarter, 34,800 buy-to-let mortgages totalling £4 billion were approved, compared with 26,300 worth a total of £2.9 billion, in the 2010 final quarter.

Demand for rented accommodation has increased significantly since the 2007 credit crunch caused mortgage lenders to tighten up their criteria and demand much higher deposits than previously.

However despite the renewed interest in property rental, the buy-to-let market has a long way to go before it reaches the 93,000 buy-to-let loans approved in the third quarter of 2007, when the market was at its peak.

It isn’t all good news for landlords though, as new research by the BDRC Continental quarterly Landlords Panel reveals a substantial increase in the number of landlords making a loss.

In the fourth quarter of 2011, 8 per cent of landlords with 20 or more properties made a loss, compared with just 1 per cent in the third quarter.

The research also showed that rental yields for all landlords fell from 6.7 per cent in the third quarter, to 5.9 per cent in the final quarter of 2011.

Meanwhile Skipton Building Society has reduced rates and fees on its buy-to-let mortgages.

The rate on Skipton’s two-year fixed rate buy-to-let mortgage for those with a loan-to-value (LTV) ratio of 70 per cent or less has been reduced to 3.89 per cent from 4.09 per cent.

There is an application fee of £245 for the product and a completion fee of £2,250.

Skipton’s Head of Products, Kris Brewster, said: “We recognise that landlords play a vital role in bringing competition and vitality to the struggling mortgage market – as well as providing private letting options for the first time buyers of the future.”

Paula John, the editor-in-chief of Your Mortgage magazine, has advised first-time-buyers to consider paying for their home through an offset mortgage.

Offset mortgages are “the way forward” she said, suggesting they are “the most tax-efficient way of using any excess income”.

However offset mortgages are only suitable for potential house buyers who have a significant amount of savings, as they take into account the amount of savings a borrower has, and ‘offset’ the mortgage loan against it.

If a house buyer has £15,000 in savings and a mortgage of £100,000, for instance, the interest on the mortgage would only be payable on £85,000.

Monthly repayments are based on the full amount but the reduced interest payments mean that the mortgage is paid off more quickly.

With the base rate at 0.5% and savings earning very little interest, offset mortgages can be a good way of making the most of a nest egg.

Ms John said: “I am staggered by how few people in this country take advantage of offset mortgages; they certainly are the way forward and everyone I know in the mortgage industry has got one themselves.”

The latest figures from the Council of Mortgage Lenders (CML) suggest that the first-time buyer market is improving.

The number of mortgages agreed for first-time house buyers increased to 18,700 in December, 7 per cent more than the previous month, and a 14 per cent increase compared with December 2010.

The CML attributes the increase to a race by first-timers to buy a property before the end of the stamp duty holiday.

The government temporarily suspended the 1% stamp duty rate for first-time buyers, on properties worth between £125,000 and £250,000, but it is due to be reinstated in March 2012.

In contrast, there was a 6 per cent fall in the overall number of mortgages agreed, with just 509,500 mortgages approved last year.