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BoE: Net mortgage borrowing rises to £3.6bn

Net borrowing of mortgage debt by individuals amounted to £3.6bn in December, according to the Bank of England’s latest Money and Credit update.

The report also showed mortgage approvals for house purchase rose to 71,000 in December, above the 12-month average to February 2020 (66,700).

Consumers borrowed an additional £0.8bn in consumer credit, on net. The effective rate on new personal loans fell by 16 basis points to 6.27% in December.

Sterling money was unchanged in December, down from a £14.1bn increase in November.

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Households’ holdings of money weakened, with net flows of £2.7bn compared with £5.1bn in November.

The effective interest rate paid on individuals’ new time deposits with banks and building societies fell to 0.36%.

Large businesses borrowing from banks fell to £0.3bn in December, whilst small and medium sized businesses repaid £0.6bn.

Private non-financial companies (PNFCs) redeemed £3.2bn in net finance from capital markets.

Dave Harris, chief executive of more2life, said: “Today’s figures suggest that December provided a quieter end to what had been a busy and turbulent year for the residential property market.

“Fuelled by the stamp duty holiday, we saw house prices climb as demand outstripped supply – especially for first or second time buyer properties.

“With gifting high on the agenda for over-55s, we also saw the later life lending market grow with the Equity Release Council highlighting that £4.8m had been released by new and returning customers in full year 2021.

“And the market’s growth wasn’t just limited to the amount of equity released – average loan sizes and the number of products in the sector both grew noticeably in 2021.

“As we look ahead to 2022, the industry needs to focus on continuing to build this momentum by creating greater awareness and education around such products, among both advisers and borrowers.”

Paul Heywood, chief data and analytics officer at Equifax UK, added: “Consumers were dealt a triple blow to their finances in December, as inflation, the festive period and a widely debated base rate rise exhausted purse strings.

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“Any consumer confidence that grew in November was quickly diminished, as demand for credit dropped and net borrowing of mortgage debt fell in line with November figures.

“We already knew that 1.7 million households defaulted on or missed at least one rent, loan, mortgage, bill, or credit card payment in December 2021, so it comes as no surprise that households were unable to inject more money into their deposit accounts.

“Lenders must be mindful of these difficult circumstances and consider using Open Banking to spot the signs of financial difficulty in advance.

“Doing so will strengthen protection against over indebtedness and help consumers to make the most informed decisions when it comes to their spending.”

Lisa Martin, development director of TMA Club, said: “Today’s figures show that 2021 ended on a quieter note when compared to the unprecedented levels of activity seen throughout the year.

“The low levels of mortgage lending since October were not altogether unexpected, especially since the market saw near record levels of activity in the lead up to the stamp duty holiday.

“The ongoing threat of interest rate rises, coupled by the increased cost of living, will lead to an increase in remortgage activity levels throughout the coming months.

“However, there is still demand among homebuyers, and brokers will need to help their customers lock into appropriate, affordable products while they can.”

By Jake Carter

Source: Mortgage Introducer

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BoE: Mortgage borrowing rises to £6.6bn in May

Net mortgage borrowing climbed in May to £6.6 billion from £3 billion in April, the latest Bank of England (BoE) data has revealed.

Despite this significant leap, the BoE said borrowing still remained below the record figure of £11.4 billion achieved in March of this year.

Mortgage approvals for house purchases inched up slightly in May to 87,500 from 86,900 in April. This was also lower than the peak of 103,200 in November 2020.

Today’s data also revealed approvals for remortgage – which only captured remortgaging with a different lender – increased slightly to 34,800 in May, from 33,400 in April. This remains low compared to the months running up to February 2020, the BoE said.

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The ‘effective’ rate – the actual interest rate paid – on newly drawn mortgages went up by two basis points to 1.90% in May.

The BoE said this was marginally above the rate in January 2020 (1.85%), and compared to a series low of 1.72% in August 2020. The rate on the outstanding stock of mortgages remained unchanged at a series low of 2.07%.

Jonathan Stinton, head of intermediary relationships at Coventry Building Society, said: “It’s not surprising that the mortgage market is continuing to perform well, with homebuyers keen to move before the first change to the Stamp Duty holiday at the end of June.

“There’s also a lot of competition amongst lenders, with mortgage rates nearing record lows in some cases – this is of course great news for borrowers”

He added: “We expect figures for June to be even higher, and for activity to return to more normal levels after the threshold for Stamp Duty has been lowered to £250,000.”

Meanwhile, Karen Noye said these figures demonstrated how buyers were ‘soaking up the last of the favourable stamp duty conditions before tapering began’.

“Once the holiday has fully come to an end in October we may enter into a market where buyers choose to wait and see and the number of people looking to buy significantly reduces,” she said.

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But she warned the end of furlough and other schemes could change the landscape going forward.

“For some time, the housing market has been propped up by government schemes and initiatives like the stamp duty holiday and then 95% mortgage scheme, which has encouraged people to borrow at times where they may have chosen to sit on their hands.

“Once the government’s helping hand has been withdrawn, we may see people opt for a wait and see approach and mortgage borrowing could plummet.

“Similarly, part of the reason the market has been so hot as of recent is due to people wanting to move to properties with gardens or home offices in light of the restrictions on movement and working.

“As things get back to normal this frenzy may start to fade and people feel happier to stay put as cities open back up and outside space is lower on the agenda.”

By Kate Saines

Source: Mortgage Finance Gazette

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BoE: Outstanding value of residential loans up 3.6%

The outstanding value of all residential mortgage loans was £1,561.8bn at the end of 2021 Q1, 3.6 % higher than a year earlier, according to the Bank of England’s (BoE) mortgage lending statistics.

The value of gross mortgage advances in 2021 Q1 was £83.3bn, 26.5% higher than in 2020 Q1, and the highest level since 2007 Q4, while the value of new mortgage commitments was 15% higher than a year earlier, at £77.5bn.

Meanwhile, the share of gross advances with interest rates less than 2% above bank rate was 59.1% in 2021 Q1, 13.3% lower than a year ago.

The share of mortgages advanced in 2021 Q1 with loan-to-value (LTV) ratios exceeding 90% was 1.1%, 4.1% lower than a year earlier, and the lowest level since these statistics began in 2007.

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The share for house purchase for owner occupation was noted at 64.1%, a rise of 17.3% on 2020 Q1.

The share of gross advances for remortgages for owner occupation was 18.0%, a decrease of 14.2% since 2020 Q1, and the lowest since these statistics began in 2007.

The value of outstanding balances with some arrears increased by 5.1% over the quarter to £15bn, and now accounts for 0.96% of outstanding mortgage balances.

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Paul Stockwell, chief commercial officer at Gatehouse Bank, said: “Buyers’ insatiable appetite to move home has meant the value of new mortgages started the year at highs not seen since before the 2008/09 financial crash.

“There has been frenzied activity in the market with movers searching for larger homes and more outdoor space, while the extension of the stamp duty discount to the end of June added more fuel to the fire in the first quarter of this year.

“The biggest stamp duty savings run out in just a few weeks’ time, yet measures from other housing indices suggest the frantic competition for property continues unabated.

“While lending may fall from these current highs, we still expect it to be an incredibly busy summer for the housing market.”

By Jake Carter

Source: Mortgage Introducer

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Bank of England carefully monitoring rise in house prices

The Bank of England is carefully monitoring the rise in house prices which has been largely fuelled by the extension of the stamp duty holiday.

A year ago activity in the housing market collapsed in the wake of the first lockdown with transactions dipping to a record low of 42,000 in April 2020.

Since then there has been a complete turnaround in the housing market in the past year, buoyed by the extension of the stamp duty cut introduced last summer.

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The tax holiday was originally due to end in March before the Government announced an extension to June. BoE figures published last month showed mortgage borrowing rose by a net £11.8bn in March, the strongest rise since the series began in April 1993.

“I think what we’re seeing in the housing market at the moment is being driven mainly by the tax holiday,” the BoE’s deputy governor Jon Cunliffe told the BBC today.

“There are some signs that people are making different housing choices and that may affect the future. It’s something we’re watching very carefully.”

House prices shot up 1.8 per cent month-on-month to 10.9 per cent last month, the highest level in nearly seven years. It followed a 2.3 per cent rise in April.

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The new record average house price is £243,000, up by almost £24,000 over the past twelve months, according to new Nationwide data released today.

Cunliffe’s comments come after Sir Dave Ramsden, another one of the central bank’s deputy governors, said the Bank of England expects the price pressures to be temporary.

“There is a risk that demand gets ahead of supply and that will lead to a more generalised pick-up in inflationary pressure,” Ramsden told the Guardian. “That’s something we are absolutely going to guard against. We are looking carefully at the housing market and a raft of real-term indicators.”

Inflation is at 1.5 per cent and is expected to rise above its two per cent target for a short period in the coming months.

By Angharad Carrick

Source: City AM

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Mortgage approvals reach to highest level since 2007

The number of mortgage approvals in November 2020 increased to the highest level since August 2007, according to the Bank of England Money & Credit data.

The number of mortgage approvals reached 105,000 in November, with net mortgage borrowing also increasing to £5.7bn.

In addition, effective interest rates on new mortgage borrowing ticked up to 1.83%.

Household deposits increased by £17.6bn in November, however there were significant withdrawals from national savings and investment accounts according to the data.

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Bank borrowing by small and medium-sized businesses was noted at £1.8bn, while net borrowing by large businesses was £0.2bn.

Tomer Aboody, director of property lender MT Finance, said: “The Bank of England figures provide further confirmation of the prevailing strength and confidence in the housing market, with the highest mortgage approval levels and further borrowings in over a decade.

“Households are looking to maximise space in their current homes by extending, converting lofts and refurbishing, as more time is spent at home.

“With mortgage rates so low, taking advantage of existing equity in homes has enabled people to borrow more for living expenses as they also deal with concerns over future employment and income, with so many industries affected by the pandemic.

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“Household deposits have increased with people saving, due to not being able to go away, out for dinners or even shopping.

“Consumers are being frugal with their spending and considering the threat of a possible recession on the horizon.

“How the government will look to tackle any forthcoming concerns with the Budget, the end of furlough and stamp duty relief will be interesting, since this new wave of the virus has come as a surprise and therefore further potential assistance is desperately needed.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, added: “Not surprisingly, the mortgage market improved considerably at the end of the year but we shouldn’t look too closely at these figures because they reflect a period of particular improvement in market activity of the previous few months.

“Moves have slowed since although many are still trying hard to take advantage of the stamp duty holiday, which will be ending very soon.

“The likelihood of further lockdown restrictions will bring short-term pain to the market which hopefully won’t be reflected in reduced values.

“Certainly the greater availability of a vaccine, on the other hand, will provide some optimism.”

By Jake Carter

Source: Mortgage Introducer

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Bank of England: Loan values rise by 2.9% annually in Q3

Despite a decreasing share of high loan-to-value (LTV) borrowing, mortgage lending remained strong in Q3 with the outstanding value of residential loans up 2.9% compared to a year earlier.

The Bank of England’s (BoE) latest quarterly mortgage lending data revealed there were £1,527.3 billion of mortgages outstanding at the end of Q3.

Meanwhile the value of new mortgage commitments – which is lending which has been agreed to be advanced in coming months – went up by 6.8% when compared to the same quarter in 2019. It reached £78.9 billion, according to the BoE, which is the highest level since 2007.

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The value of gross mortgage advances during the quarter was down 14.7% on Q3 2019 at £62.5 billion.

What’s more the proportion of mortgages advanced during the quarter with LTVs of 90% or more were 3.5% which is 2.4 percentage points lower than a year ago.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “This is no real surprise with many lenders pulling back from this market, and it is only just starting to recover, which is good news for first-time buyers in particular.”

Commenting on the rest of the data he added: “The Bank of England figures show a strong lending market, as we have seen on the ground, with new commitments for the coming months some 6.8% higher than a year earlier.

“There is plenty of business in the pipeline which is working its way through as buyers try to take advantage of the stamp duty holiday. As long as they use good advisers – a mortgage broker and a switched-on solicitor – this should be possible, despite some scaremongering that they are already too late.”

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A ‘precarious’ market

But Karen Noye, mortgage expert at Quilter, thought today’s data painted a ‘precarious’ picture of the housing market at the moment.

“The market is clearly burning bright thanks to the fuel poured on it as a result of stamp duty cut but whether the fire can keep blazing is yet to be seen,” she said.

“The continued increase in house prices is likely to be unsustainable and if the stamp duty holiday is dropped in March and significant economic headwinds as a result of the pandemic start to bite, we may see a very different picture with borrowing and lending being significantly curtailed.”

Noye thought the fact the value of new commitments had increased by as much as 6.8% was ‘worrying’ and ‘should ring alarm bells’.

“While it would be foolish to draw comparisons between the mortgage market now and the one back when the financial crash hit in 2008, we are dealing with unchartered waters and it is worth proceeding with caution,” she said.

By Kate Saines

Source: Mortgage Finance Gazette

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