Wednesday 13 November 2013

Lending for house purchase reaches a six year peak

The Council of Mortgage Lenders (CML) found that September saw an Increase by a significant 34 per cent in first-time buyer lending, with 23,600 taking out home loans, compared to the same month last year and despite a decline of 12 per cent from August.


The typical first-time buyer income multiple continued an upward trend as they typically borrowed 3.39 times their gross income. Despite this, the continued downward drift in mortgage interest rates have kept borrowers’ payment burden low.

Overall the usual seasonal dip seen in mortgage lending in September was no different this year but was up by 20 per cent compared to the same month last year, with lending in the third quarter at its highest since 2007.

There were 52,800 loans for home owner house purchase in September with a total value of £8.4 billion, down by 14 per cent on August. Overall in the third quarter of 2013, there were 170,700 house purchase loans advanced, worth a total of £27.1bn, which is the highest quarterly figure since the fourth quarter of 2007.

Loans advanced to home movers totalled 29,100 in September, which was down in volume by 16 per cent compared to August but up by 11 per cent compared to September last year. Home mover loans totalled £5.2bn in value in September, which was down 13 per cent on August but up 18 per cent compared to last year.

Home-owner remortgaging showed strong growth in September with a total of 32,900 remortgage loans advanced in the period, up 20 per cent compared to August and 36 per cent on September last year. This totalled £4.7bn in value, an increase of 24 per cent on August and 47 per cent in value compared to September 2012.

Buy-to-let lending in the third quarter of 2013 grew with 43,900 loans advanced in this quarter which was up 16 per cent on the second quarter of 2012 and 36% compared to last year. These loans were worth £5.7bn which was up 19% on the previous quarter and 43% up compared to the same period last year.
Director general of the CML Mr Paul Smee, was quoted saying,: “First-time buyers were a key driver in the first half of 2013 but now home movers and remortgages are showing renewed strength which puts the market in a good position to continue momentum into the final few months of 2013 and the New Year.”
Managing director of Phoebus Software Mr Paul Hunt had said,: “By almost any measure you use, it’s clear that lending levels improved drastically in the last few months. The mortgage industry has found a way to sustainability and significantly boost activity in the property market.

“There are many new signs of life: house purchase lending is up by a fifth compared to a year ago and first-time buyer activity has jumped significantly. Lenders have been proactive in their approach to lending and their innovative steps to improve mortgage availability have heated up the mortgage market. Some of the roadblocks are being knocked off the pathway for prospective buyers, and the number of mortgage deals on the market has increased rapidly. As the Help to Buy scheme gains momentum it should kick-start the housing market from the bottom tier. Without doubt, the mortgage market is taking steps towards fertile grounds.”

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Friday 8 November 2013

Do you understand the Help to Buy Mortgage Guarantee scheme?

According to an independent survey commissioned by the Building societies Association BSA Consumers who are looking to purchase their first home or move house are confused by the mortgage guarantee element of the government’s Help to Buy scheme.


The BSA survey suggests, 43 per cent of those actively looking to buy a residential property are confused about the benefits on offer through the scheme.

In addition, 31 per cent of consumers who are looking to buy or move admit they do not know whether there is a difference between a 95 per cent mortgage offered by a lender which has signed up to the scheme and a 95 per cent mortgage from a lender which hasn’t.


Results from the survey show that:

  • 18 per cent of first time buyers and 17 per cent of home movers believe that they can borrow more through this scheme than with a ‘standard’ 95 per cent loan.

  • 12 per cent of both first time buyers and home movers believe that their monthly repayments will be lower as a result of taking a Help to Buy: mortgage guarantee loan.
  • One in ten first time buyers (just 5 per cent of home movers) believe that the scheme will protect them if they cannot keep up their monthly payments.

  • 12 per cent of first time buyers (just 6 per cent of home movers) say that Help to Buy: mortgage guarantee will protect them if their house price falls.

  • 24 per cent of first time buyers and 22 per cent of home movers say that they are more likely to be approved for a Help to Buy mortgage.


In fact not one of these suppositions is true. The Help to Buy: Mortgage Guarantee Scheme has been designed to encourage more lenders to lend to borrowers with small deposits, increasing the availability of this type of loan. The mortgage that an individual consumer receives and the approval process they go through, are subject to the same lending rules whether a mortgage is inside the Help to Buy scheme or not. When considering the affordability of the Help to buy: mortgage guarantee loan, until the new FCA rules related to the Mortgage Market Review come into force in April 2014 borrowers may well be subject to stricter requirements then they would be otherwise.

The introduction of and the publicity surrounding the two Help to Buy schemes has had a positive effect on consumer confidence and is likely to increase the overall volume of higher loan to value ratio lending, as some banks get back into this market. Some lenders, particularly many building societies, have consistently offered loans requiring deposits of five or 10 per cent and continue to do so outside the Help to Buy Scheme. Borrowers may find that they have a wider choice than they expected when shopping around for a low deposit loan.

Paul Broadhead, BSA head of mortgage policy was quoted as saying: “It is unsurprising that some consumers are finding the Help to Buy: Mortgage Guarantee Scheme difficult to get their heads round. The situation has been complicated by the launch of two very different schemes both called Help to Buy.
“It is essential that providers offering loans under the scheme leave applicants in no doubt about the terms of their mortgage loan. I am particularly concerned that a reasonable minority of active first time buyers believe that they can borrow more than normal and that they are in some way protected – neither assumption is true. In fact a 95 per cent mortgage through Help to Buy: mortgage guarantee is exactly the same as a standard 95 per cent mortgage. It is vital that these myths are dispelled at application to prevent the possibility of consumers misunderstanding their mortgage loan and later feeling misled.”

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