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Bank of England: Mortgage borrowing reaches five-year high in February

Individuals secured an additional £6.2 billion in mortgage borrowing in February which is the strongest level since March 2016, the latest Bank of England (BoE) figures have revealed.

The latest data showed it was not just net borrowing which was buoyant last month, but there were also a high number of approvals.

The 87,700 approvals, although down on the peak of 103,700 in November 2020, were still well above the monthly average in the six months to February 2020, which was 67,300.

The BoE Money and Credit report for February 2021 also reported approvals for remortgages with a different lender increased slightly from 32,600 to 34,300 between January and February.

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When it came to gross borrowing the figure reached £27.7 billion which was very close the March 2016 figure of £27.9 billion.

The BoE data also revealed the ‘effective’ rate – the actual interest rates paid – on newly drawn mortgages increased by six basis points to 1.91% in February.

It said this was slightly higher than the rate in January 2020 (1.85%), and compared with a series low of 1.72% in August 2020. The rate on the outstanding stock of mortgages remained at series low (2.09%).

The BoE thought the strong borrowing figures were caused by the flurry of activity as buyers rushed to meet the original stamp duty holiday deadline of 31 March.

But John Phillips, national operations director, Just Mortgages and Spicerhaart said thought there were other influencing factors at play.

He said: “This is only part of the story. A year on from the start of the first lockdown, what is clear is that the pandemic has spurred people into action.

“Whether it is those looking to move for more outside space. Or the lack of commute meaning some are choosing to leave the city, in a year where our lives were turned upside down, priorities were shaken up.

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“With the extension to the stamp duty holiday, the reintroduction of 95% LTV mortgages and the furlough scheme running till September, the property market should keep moving at a pace and we may see records broken for the first quarter of 2021.”

Meanwhile Jonathan Sealey, CEO of specialist short term lender Hope Capital, said the figures were also testament to the hard work of everyone involved with the property and mortgage industry.

“All those involved in the sector should take credit for that, and initiatives such as virtual viewings and the introduction of new products during the lockdown, have contributed to the property market staying operational,” he said.

“It’s also been an opportunity for specialist lenders particularly who have been able demonstrate the agility and speed that sets them apart from high street lenders, in ensuring people can get their deals over the line, no matter what else is happening.”

By Kate Saines

Source: Mortgage Finance Gazette

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Mortgage borrowing remains high in January – Bank of England

Net mortgage borrowing remained at £5.2bn in January, according to the Bank of England’s Money and Credit statistics for January 2021.

This is up from the monthly average of £4bn in the six months to February 2020.

The statistics also show that there were 99,000 mortgage approvals for house purchase in January, in line with the average of 100,000 since October 2020.

In addition, effective interest rates on new mortgage borrowing fell to 1.85% in the first month of the year.

That is in line with the rate in January 2020, and compares with a series low of 1.72% in August 2020.

The rate on the outstanding stock of mortgages fell to 2.09% which is a new series low.

David Whittaker, chief executive of Keystone Property Finance, said: “Today’s statistics show that the housing market remained resilient as the New Year kicked off, with demand for property continuing to rise as people take advantage of low interest rates and the stamp duty holiday.

“However, it’s clear that mortgage transactions are beginning to slow as the impact of the third national lockdown on consumer confidence and uncertainty about the future of the stamp duty holiday takes hold.

“In addition, while demand for property has remained strong, data shows that the supply of new property has decreased since the beginning of the year.

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“As well as navigating this unprecedented market, buy-to-let borrowers have an added challenge of dealing with recent and upcoming regulatory changes.

“As such, the value of advice for landlords cannot be understated.

“The role of mortgage brokers has never been more important in helping landlords understand this shifting landscape and find the right mortgage for them and their individual circumstances.”

Joshua Elash, director of property lender MT Finance, added: “There is an astounding level of liquidity in the market at a time when the economy itself is in a state of partial paralysis. It is unusual and feels dysfunctional.

“Consumer borrowing is down, as lockdown continues to bite into people’s ability to go out, shop, and enjoy the things in life we usually take for granted.

“This new reality has meant that households continue to deposit savings at remarkable levels, given that interest rates are at historically low levels.

“Net mortgage borrowing is also robust, encouraged by the stamp duty holiday and effective interest rates as low as 1.85%.

“With the Chancellor rumoured to be rolling out a mortgage guarantee scheme, which will see the return of higher loan-to-value deals, this trend will continue, leading to serious inflation in property prices.”

Islay Robinson, group chief executive of Enness Global Mortgages, said: “These latest mortgage approval numbers highlight a market at its most buoyant in the month of January since before the financial crisis of thirteen years ago.

“Activity is far higher than normal levels and this has no doubt been driven by the current stamp duty holiday.

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“Homebuyers are shrugging off any fears of a pandemic property decline in their rush to secure a stamp duty free purchase.

“This frenzy looks likely to continue until summer, given Rishi Sunak’s potential pending announcement of an extension via Wednesday’s budget.

“The question for sellers, estate agents and mortgage brokers is, ‘what happens once the levy is reinstated?’

“We may be about to take a step back from the cliff-edge should the stamp duty holiday be extended.

“However, this is only prolonging the inevitable and, if anything, will only steepen the gradient of any potential market decline.

“We should perhaps make the best of these ‘sunny days’ whilst we can before another stamp duty deadline countdown leaves us teetering on the edge once again.”

Iain McKenzie, chief executive of the guild of property professionals, added: “Despite January traditionally being a slower month for purchasing a home, these figures show the stampede to buy property before the stamp duty holiday ends.

“It is good news for the wider economy that there is still interest in moving up the property ladder and consumer confidence in mortgages is still robust.

“Consumers are also repaying debts at an incredible rate, which can be partly ascribed to the savings that many employees are making by working from home.

“However, this could also indicate a lack of confidence in how the economy will fare this year, as people are choosing to pay down debts rather than spending the extra cash.

“Interest rates on mortgages are some of the lowest we’ve seen in a long time, and this could be another strong year for the housing market.”

By Jake Carter

Source: Mortgage Introducer

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BoE: July mortgage borrowing up £0.3bn month-on-month

In July, households borrowed a net additional £2.7bn secured on their homes, according to the BoE Money and Credit report.

This was up on the £2.4bn in June, but below the average of £4.2bn in the six months to February 2020.

The increase reflected a slight increase in gross borrowing to £17.4bn in July, below the pre-COVID February level of £23.7bn and consistent with the recent weakness in mortgage approvals.

The number of mortgage approvals for house purchase continued recovering in July, reaching 66,300, up from 39,900 in June.

Approvals were 10% below the February level of 73,700, but more than seven times higher than the trough of 9,300 in May.

Approvals for remortgage were little changed compared to June, at 36,000; they remained 30% lower than in February.

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The effective rates on new and outstanding mortgages were little changed in July.

New mortgage rates were 1.73%, a decrease of 4 basis points on the month, while the interest rate on the stock of mortgage loans fell 1 basis point to 2.15% in July.

Hugh Wade-Jones, managing director of Enness Global Mortgages, said: “The latest rate of mortgage approvals is really quite astonishing given the dire position of the market just a few short months ago.

“There is no doubt that the huge surge of buyer demand seen once the market reopened has been seriously turbo-charged due to the stamp duty holiday announced shortly after, with the combination of both causing buyers to return to the market at mass.

“As a result, we’ve seen the number of people approved for a mortgage rebound from the depths of pandemic paralysis in May to hit almost the same levels as this time last year in just two months, with the current trajectory sure to return the market to pre-lockdown levels in no time.

“The rate of this return to form really shouldn’t be underestimated and these notably heightened levels of buyer demand should prove just the medicine for the UK property market, reversing any pandemic decline in house price growth seen during lockdown.”

Gareth Lewis, commercial director of MT Finance, said: “There are positive signs indicating plenty of consumer confidence out there as people are borrowing money.

“There are more ‘for sale’ and ‘sold’ signs springing up, and even tales of gazumping.

“August’s numbers will show even more of an uptick in transactions once the stamp duty holiday starts to filter through to the figures.

“While July’s numbers show an improvement on June, they would have been better still if transactions weren’t taking so long.

“Lenders still have staff furloughed or working from home, and it is taking them too long to process applications.

“This isn’t going to change for a while yet as they don’t have the capacity to bring everyone back to the office.

“With many surveyors only just coming back off furlough as well, this is having a negative impact on turnaround times.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “Mortgage approval numbers always provide a useful lead indicator of direction of travel for the property market in the coming months.

“Unfortunately, these figures relate to the period when we were emerging from lockdown but before the full benefit of the stamp duty holiday was being felt.

“Contact with mortgage brokers or lenders is not always the first thought of aspiring buyers.

“As a result, these approvals do not reflect the stronger upsurge we noticed across most property types and price ranges from the beginning of August.”

By Jessica Bird

Source: Mortgage Introducer

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New Covid-19 support package from Nationwide

Nationwide has guaranteed that none of the society’s mortgage-holders will lose their home due to coronavirus.

Nationwide has launched a Home Support Package to help customers struggling financially due to Covid-19.

The society is offering extended support for people financially impacted by the outbreak and has put in place a range of options for both homeowners and tenants.

The move comes after the FCA announced that mortgage borrowers will be able to ask lenders for a second three-month mortgage payment holiday.

In addition to three-month payment breaks for both residential and buy-to-let mortgages, the society is also enabling partial payments such as temporary interest-only arrangements.

The five points of the Home Support Package are:

Commitment not to repossess any homes over the next 12 months

No mortgage member will lose the property in which they live if they are in arrears as a result of Covid-19 and work with the society to get their finances back on track. Nationwide says it will protect homes in this way until the end of May 2021.

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Option to change the way people pay their mortgages

Nationwide is offering flexibility for members in meeting their mortgage payments where they can. Assessments will ensure the best outcome, and timeframe, for people’s circumstances. This could include temporarily moving to interest-only payments to minimise the long-term impact on their finances.

New three-month mortgage payment breaks for those still in financial difficulty due to Covid-19

This would mean a total of up to six months’ support to those most needing it, following an assessment to ensure the hardest-hit customers receive additional support. There will be cases where a payment break is not in the best interests of someone’s circumstances. In these cases, Nationwide will suggest alternatives.

Encouraging landlords to pass on payment breaks to tenants

Nationwide is contacting all its buy-to-let landlord customers to let them know that if their tenants require a rent payment break due to the impact of Covid-19, they can have a mortgage payment break on the property.

Greater focus on housing advice and support

Through Nationwide’s longstanding partnership with Shelter, the society will fund more advisers for the charity’s helpline services which provide specialist advice to those with housing, debt and welfare issues.

Nationwide will also support the introduction of new Shelter community engagement officers, who will provide community outreach for those people that struggle to access support.

Coronavirus support page

New payment breaks – partial or full – will be available via the society’s online coronavirus support page from mid-June.

Members already receiving payment support will be contacted prior to it ending and directed online should they require further support due to ongoing financial difficulties as a result of Covid-19. All payment breaks will continue to accrue interest.

Joe Garner, Nationwide’s chief executive, says: “There is a real need to reassure people, particularly those on mortgage payment breaks who are worried what will happen next. At a time when people are concerned about their jobs, bills and health, we want to do everything possible to ensure they don’t worry about having a roof over their heads. As a mutual, founded to help people into a home of their own, this is what building societies have always been about. We hope this additional support will provide extra flexibility to those who most need it, to help get them back on track.”

Nationwide is also asking the government to consider changes to the way housing support is provided, asking that Local Housing Allowance covers the 50th percentile of rents in any given area rather than the current 30th percentile.

This is something Shelter and the Money Advice Trust have also called for, while also working with Government and other organisations to establish a more consistent and customer-focussed approach to debt collection and recoveries.

Written by: Emma Lunn

Source: Your Money

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1.24 million mortgage borrowers given payment holidays by lenders

More than 1.2 million mortgage payment holidays have been granted to households whose finances have been impacted by Covid-19, UK Finance has revealed.

This means that one in nine residential and buy-to-let mortgages (11.2%) in the UK are now subject to a payment holiday.

For the average borrower, the payment holiday amounts to £260 per month of suspended interest payments. This is calculated using the average interest rate of 2.37% on an average loan size of £132,128 in the UK, as of 31 December 2019.

On 17 March, the Government gave the go ahead for mortgage lenders to allow payment holidays and the number has more than tripled in the two weeks between 25 March and 8 April, growing from 392,130 to 1,240,680.

This is an increase of nearly 850,000 or an average of around 61,000 payment holidays being granted by lenders each day.

According to the Building Societies Association, a quarter of a million of the total figure of 1.24 million is mortgage payment holidays granted by building societies.

The UK Finance figures are grossed up from a representative sample and could be revised slightly as firms identify double-counting and other anomalies in previous daily totals.

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Stephen Jones, UK Finance CEO, said: “Mortgage lenders have been working tirelessly to help homeowners get through this challenging period. The industry has pulled out all the stops in recent weeks to give an unprecedented number of customers a payment holiday, and we stand ready to help more over the coming months.”

Robin Fieth, Building Societies Association CEO, said: “We know that this is a difficult time for many homeowners with a mortgage and building society staff have been working hard to offer individuals the right solution.

“For almost quarter of a million so far, that has been a three month payment holiday offering a much needed breathing space to families whose household income is under severe pressure during the current crisis.”

Telephone lines remain extremely busy and lenders have been updating their websites with the latest information on the support available to answer customers’ queries. Many lenders are offering customers the option to apply for a mortgage payment holiday through an online form on their website.

Lenders are also urging mortgage holders not to cancel their direct debits before a payment holiday has been agreed, as this will be counted as a missed payment and could impact their credit file.

By Joanne Atkin

Source: Mortgage Finance Gazette

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UK mortgage approvals jump as political uncertainty eases

Mortgage approvals have risen to their highest level since February 2016, data published by the Bank of England on Monday showed.

The central bank said there were 70,888 mortgage approvals for house purchase in January, a 4.4% improvement on December’s figure and the highest for 47 months. It was also comfortably above analyst expectations for around 68,000.

Remortgage rates also grew, by 3.9% to 52,100.

Net mortgage borrowing by households, which lags approvals, was £4.0bn, slightly below the £4.3bn six-month average. The annual growth rate for mortgage borrowing remained at 3.4%.

Howard Archer, chief economic advisor to the EY Item Club, said: “The data very much fuels the view that the housing market is currently benefiting markedly from increased confidence and reduced uncertainties following December’s general election.

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“A stream of recent data and surveys suggest that the housing market has shifted up a gear after a lacklustre 2019, with particular softness around the third quarter.

“Certainly there is compelling evidence that the housing market has benefited from increased optimism and reduced uncertainties following December’s decisive general election, as well as a greater near-term clarity on Brexit.

“We had been expecting the housing market to continue to benefit in the near term from reduced uncertainties, but it is possible that concerns and uncertainties over the coronavirus outbreak could have an impact.

“We currently expect house prices to 3% over 2020.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The effective interest rate on all new mortgages dropped to 1.85%, from 1.88% in December, remaining well below the effective rate on the outstanding stock. As a result, the refinancing tailwind to growth in household’s disposable incomes remains on track to strengthen modestly this year. Lower mortgage rates also have underpinned the recover in house purchase mortgage approvals in January.”

The Bank also reported on Monday that the annual growth rate of consumer credit – defined as credit used by consumers to buy goods and services – remained at 6.1% in January. That represented growth of £1.2bn, above both the average seen over the last six months and the consensus, both of which were £1.0bn. The Bank said the rate was “stabilising after the downward trend seen over past three years”.

By Abigail Townsend

Source: ShareCast