Mortgages Uncovered

Lending figures for mortgages have recently suggested that buyers are now coming back into to the housing market.

The amount of mortgages that were approved for purchasing homes have jumped up considerably by 19% during the month of February and is a definite sign that home buyers are eventually returning back to the housing market.

37,937 mortgages for home loans were approved in February which is the highest level that has been seen since last May say the Bank of England.

The new figure now suggests that double digit house prices and falling interest rates have become a temptation for bringing buyers back into the housing market.

Last week figures were released from the British Bankers’ Association which showed that the amount of mortgages that were approved for home purchasing through major banks had risen in a third month in a row in February.

Today’s BofE figures suggested that sales were picking up again.

UK economist at Capital Economics, Vicky Redwood said:

“February’s household borrowing figures suggest that housing market activity may finally have turned a corner. The rise in the number of mortgage approvals for new house purchase … might suggest that the pick-up in new buyer inquiries is feeding through into actual activity. With new buyer inquiries still rising, this is clearly quite promising.”

In March house prices rose again, say the Nationwide.

The Nationwide building society claimed that house prices further increased by 0.9% in comparison to the previous month.

The annual rate of property price falls fell from February’s 17.6% to 15.7% in March, which brought the average cost of a UK home to £150,946.

Nationwide described the change as a “surprise bounce” and warned against concluding the market had turned.

Chief economist at Nationwide, Fionnuala Earley said;

“While the rise in prices in March is welcome, it is far too soon to see this as evidence that the trough of the market has been reached. Cuts in interest rates and the Bank of England’s move to expand the amount of money in the system would take time to work through into the housing market before there was a sustained recovery in house prices.”

The survey from Nationwide found that UK house prices had dropped by 4.2% during the first 3 months of this year in comparison to the final quarter of 2008.

Ms Earley commented that

“… the significant slowdown in falling prices year-on-year was distorted by the sharp decline in the market last year.”

The figures from the building society further show that the prices of flats have been particularly volatile in comparison with other types of properties.

Within the Times newspapers recently, the paper has talked about an particular instance which saw a customer of Northern Rock turned down when he tried to take back his mortgage overpayment by withdrawing from what is called his ‘flexible’ mortgage.

There are many people who have these flexible mortgages with Northern Rock and have also been told that they may overpay but based on understanding that they may later withdraw their money back if they wished to do so by making a telephone call to the bank.

Apparently, a reader of the Sunday Times overpaid £1 million on their £3 million mortgage account and then tried to withdraw back £25,000 only to be surprised when met by a series of questions regarding his outgoings before he was referred to an underwriter.

Now it is official that Northern Rock customers may no longer have the option to withdraw overpayments.

An independent mortgage broker, Ian Gray told The Times Newspapers;

“This is yet another example of lenders tightening criteria for borrowers unexpectedly. Many people took out those flexible deals with the promise that it was a place to park cash and they could get it next day with a phone call. There are now serious questions about whether they can get their money.”

Lending figures for mortgages have recently suggested that buyers are now coming back into to the housing market.

The amount of mortgages that were approved for purchasing homes have jumped up considerably by 19% during the month of February and is a definite sign that home buyers are eventually returning back to the housing market.

37,937 mortgages for home loans were approved in February which is the highest level that has been seen since last May say the Bank of England.

The new figure now suggests that double digit house prices and falling interest rates have become a temptation for bringing buyers back into the housing market.

Last week figures were released from the British Bankers’ Association which showed that the amount of mortgages that were approved for home purchasing through major banks had risen in a third month in a row in February.

Today’s BofE figures suggested that sales were picking up again.

UK economist at Capital Economics, Vicky Redwood said:

“February’s household borrowing figures suggest that housing market activity may finally have turned a corner. The rise in the number of mortgage approvals for new house purchase … might suggest that the pick-up in new buyer inquiries is feeding through into actual activity. With new buyer inquiries still rising, this is clearly quite promising.”

The proposals regarding the future of regulation for mortgages within Europe may lead to a clash of what will occur within a national and European level the CML claim.

Council of Mortgage Lenders in the UK recently warned that the separate debates which are ongoing with the Financial Services Authority in London and the European Commission who are both following similar timetables is going to create a possible risk of conflict.

CML further warns that the hostility due to the market failings in the United States is becoming a political reality within Europe. A spokesman said; ‘While clearly there are differences between the UK and US, some of that hostility could spill over to the UK. We saw elements of this in the build-up to the recent G20 summit and the different stances of France and Germany, and the US and UK. The Commission and other European institutions appear to acknowledge, however, that markets in the US and Europe are widely different. A key goal therefore, both for us and for the European Mortgage Federation, is to ensure that the Commission continues to acknowledge the diversity of national markets.

The CML further reiterated that; “There is an opportunity in the coming months to help the Commission strike the right balance between measures that would work on a global or European level and those that would not, and to try to avoid a clash between regulation at a European and national level.”

Both Bank of Scotland and Halifax are now offering brand new mortgage deals for their existing customers who have zero equity in their homes!

Both lenders discreetly extended their LTV’s on some of their recent mortgage packages in order to keep their customers who are reaching the end of their tracker or cheap fixed.

Now borrows with no equity at all and even those that may own money on the value of their home do qualify for those loans that are aimed at people with deposits of a minimum of 5%.

In recent times mortgages which allow home owners to borrow 100%of the value of their properties have completely disappeared from the market whilst plummeting house prices have increased the further threat of a longer period of negative equity.

A Halifax spokeswoman said;

“it is important to offer a range of options for customers coming off existing deals, even if their equity had been wiped out. Borrowers who are not offered a new deal when their existing one expires have to revert to their lender’s standard variable rate (SVR). While these are low at present – Halifax charges 3.5 per cent, for example – there is a risk that if interest rates rise sharply, borrowers may be stuck with unaffordable mortgage payments.”

A new division of Crystal Mortgages known as Crystal Commercial Funding has claimed that it believed the commercial market particularly property was about to turn and they believe they can provide a safe foundation for those SME’s who have just been unfortunate in missed out on bank funding.

Roger Dewsbery, at Crystal Commercial Funding, said: “Crystal has always been in commercial mortgages, but we thought there was a window because these days a business will jump through hurdles to get its money from the bank and then fail for a small reason. We have introduced this little window called ‘near prime’.

That doesn’t turn them into a sub-prime borrower – we are just pitching it somewhere in the middle. There will be an increased level of risk, the level of risk will decide the cost of borrowing but sometimes it can only be a tiny amount.

“I’m not criticizing the banks, I’m just saying they have got no margin for movement. “

It seems that hope is up that the new product will really help a number of firms who are caught in a no win situation with their current lender who is too expensive to stay with and too expensive to leave!

If they are able to build confidence into the market then the feeling that commercial properties are about to tumble in value will have nearly reached the end

In a bid to take on the mortgage brokers, HSBC is now trialing a new “whole of market” full mortgage and finance advice service which is available to their customers throughout its branches in the UK.
The bank is set to charge their customers £150 to speak to an HSBC ‘Mortgage Matcher consultant’, who is a person that has to offer completely impartial advice on the markets best mortgage deals including those from the bank’s rival lenders.

HSBC bank, who is now the sixth largest lender throughout the UK has recently teamed together with John Charcol, mortgage broker, to develop this unique scheme.

Peter O’Donovan, head of mortgages at Bestinvest, a financial advisor, said: “This is a threat to brokers, who have already been hit by customers choosing to get mortgages straight from lenders.”

Andy Mielczarek, head of retail products at HSBC, said: “We remain totally committed to funding our own mortgage business, with £15 billion available for 2009 – double what we lent in 2007. However this service offers our customers who are less confident in deciphering the right mortgage deal for themselves, another reason to talk to us and gives us more options to help them.

Melanie Bien, of Savills Private Finance, a broker, said: “This appears to be a natural step for HSBC, but other lenders, such as Bradford & Bingley, have tried, and failed, to offer whole of market advice in branch in the past.”

The partly nationalized building society Bradford & Bingley has just published its’ annual report and it clearly details that they will experience a troubled year ahead, however, it did show a 7% rise in pre-tax profit. The report also stated that it had occurred £507 million of mortgages that had turned sour.

The report, published a few days ago, also said that the firms had incurred the huge mortgage charges that had turned sour, from £22.5 million in 2007.

B&B admitted that most of their accounts had come into arrears on houses that had been reposed in the last three months.

The report also concludes that arrears rates are likely to continue deteriorating throughout 2009 and 2010.

The executive chairman, Richard Pym has presented a business plan to reduce the mortgage book at B&B from the current £42 billion to £36.3 billion by the end of the year 2011. He admitted that the rate of redemptions is slowed by the state of the economy and falling house prices.

“Many of B&B’s borrowers have limited alternative refinancing opportunities due to a combination of increasingly conservative lending criteria and a significant reduction in mortgage lenders’ appetite for buy-to-let and self-certified lending,” the business plan warns.

A new scheme which is the first in Scotland has just been launched by Dundee City Council and it sees the council offering customers 100% mortgages to help tenants and those who are first time buyers without saved deposits and some people who have recently been refused credit from banks.
The mortgage deals will offer three times the applicants’ salary and have been introduced in an attempt to boost the local economy within Dundee.

Dundee local authority has already earmarked £5.5 million for their new one year mortgage scheme which is to provide mortgages for fifty council tenants and fifty private sector buyers in Dundee.
The sales of council homes within Dundee have recently dropped with the number of council properties sold by the end of 2008 are expected to show that they are “significantly below” the anticipated level of 180 properties.

Critics are worried about the long-term impact of the scheme. Mark Wallace of the Taxpayers Alliance said: “I think it is a very worrying and misguided proposal. There is a danger of not only repeating the mistakes already made by banks but actually compounding them. A lot of councils have got severe financial problems as it is, just trying to deliver essential services.”

Housing convener George Regan said: “It is the role of Dundee City Council to do everything we can to address the problems created by the cash situation nationally and internationally. We feel this will be a help to council tenants and first-time buyers. There is no intention to have high-risk strategies to put council taxpayers’ money at risk.”