Finance Matters

Posts Tagged ‘remortgaging’

52,854 mortgage loans were agreed in principle in November according to the latest figures from the Bank of England, just 68 higher than the previous month.

Although mortgage lending in November 2011 was 12% higher than in November 2010, there has been no significant improvement for four months.

Mortgage approvals remain at half their 2007 level, before the onset of the banking crisis.

Since the recession many first time buyers have been unable to raise the deposits demanded by lenders, which can be as high as 25 per cent.

With household incomes under pressure from high levels of unemployment and inflation the outlook for the housing market remains weak with house prices expected to fall by up to 10 per cent.

The number of approvals for remortgaging also fell in November to 31,154, compared with an average of 32,448 for the previous six months.

In contrast, mortgage lending by building societies and mutuals increased to £2.5 billion in November 2011 compared with £2 billion in November 2010.

Gross mortgage lending in the first 11 months of 2011 grew by 16% to £21.5 billion compared with £18.6 billion in the first 11 months of 2010.

This represents the highest level of gross mortgage lending since Building Societies Association (BSA) started reporting on the current basis in January 2010.

Adrian Coles, director-general of the BSA, said: “Mutuals have shown their resilience in the face of tough market conditions over the past year and have continued to see their new mortgage lending increase.

“Mutuals lent 16% more from January to November 2011 compared to the same period in 2010, whilst lending across the mortgage market as a whole has remained broadly flat”.

“These are encouraging trends against rather discouraging developments in the wider economy”, he continued.

Although the mortgage market is currently stable, the outlook remains uncertain in the face of the eurozone crisis.

The Council of Mortgage Lenders (CML) has reported that 48,200 mortgages were taken out to buy homes in September, two per cent less than in the previous month.

However there was a 3 per cent improvement in the number of mortgages approved for house purchases during September compared with a year ago.

The number of loans to first-time buyers increased by 5 per cent to 18,200 from September 2010 to September 2011 and first-time buyers also benefited from lower deposits.

The average deposit first-time buyers needed to put down was 20% of their home’s value, compared with 24 per cent in September 2010.

The figures show that demand for remortgaging increased during September, although just 34,200 loans were advanced, slightly less than in the previous month.

While the figures show an improved picture for first-time buyers the eurozone crisis could make lenders more cautious going forward, especially with this group of borrowers.

The crisis has also caused Libor – the rate banks charge to lend to each other – to rise, with mortgage lenders reporting that the cost of loans is starting to increase as a result.

A new report from Savills suggests that house prices could fall by as much as 11 per cent by 2016, taking account of inflation.

While low interest rates are expected to keep the number of repossessions down and stop prices crashing, the company expects prices to fall in the face of the turbulent economy and difficulties is securing mortgage finance.

In 2007, the average price of a house was £184,000 compared with the current average of £161,000.

Savills expect the average house price to rise to £170,000 by 2016, representing an 11 per cent fall when inflation is taken into account.

Barclays claims that UK consumers are missing the potential to save money because they are unwilling to remortgage.

According to a survey by the bank, although nearly all homeowners (92 per cent) are trying to cut costs, most people do not realise how much they could save just by changing their mortgage.

Over half (58 per cent) of those surveyed had only ever changed their mortgage as a result of a house move, although three-quarters (74 per cent) said they would consider doing so in order to save up to £50 a month.

Most of those surveyed thought that they would save very little by changing their mortgage, while according to Barclays the savings could be substantial.

Barclays claims that homeowners in the UK could save up to £346m over the next two years by changing to the banks’ fixed and tracker rate products.

The bank said there is a ‘clear disconnect with people failing to realise how much they can actually save by swapping their mortgage’.

Remortgaging is also being promoted by the government, according to a report in the Daily Mail, but its proposals have been called a ‘smash and grab raid’ on pensioners’ incomes.

The new proposals would mean that homes would be included in a means test when it comes to paying for care, and this could force pensioners to remortgage their homes.

This would not only affect elderly people who need residential care, but could also affect those who wish to remain in their own homes but need help with tasks such as washing, feeding and clothing themselves.

In order to pay for this help they could be forced to seek equity release on their homes.

The recommendations by Andrew Dilnot are part of a report on the future of care services.

The UK’s High Street banks approved 74,590 mortgages in July, with the figure up from 71,521 in June and ahead of the previous six-month average (69,803). According to the British Bankers’ Association (BBA) house purchase approvals came in at 33,417, activity having gathered pace since June (32,123) and exceeded the previous six-month average (30,695). At [...]

Annual growth in banks’ gross mortgage lending stood at £7.6 billion in June, with the figure 11% lower than a year earlier, according to the British Bankers’ Association (BBA). Early signs of growth in the buy-to-let market were evident but both house purchase and remortgaging approvals continued to be weak, and with repayments still at [...]