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Value of UK Mortgages Climbs 3.6% Between Q1 2020 and Q1 2021

The outstanding value of all residential mortgage loans in the UK stood 3.6 per cent higher at the end of Q1 2021 than at the same point the year before, according to new Bank of England figures.

The figures, released yesterday, also showed that the value of new mortgage commitments was 15 per cent higher than in the same quarter the year before.

However, the value of outstanding balances with some arrears increased by 5.1 per cent over the quarter to £15 billion, and now accounts for 0.96 per cent of outstanding mortgage balances.

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Commenting on the figures, Paul Stockwell, chief commercial offer 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.”

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He added: “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.”


Source: Property Wire

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How will the housing market fare after the stamp duty holiday?

The housing market has come a long way since the country entered its first lockdown more than a year ago.

In mid-May last year the housing secretary lifted the freeze on home moves in England – which for seven weeks had been prohibited unless “reasonably necessary” – with Scotland and Wales following a month later.

After the chancellor announced a stamp duty cut in July to “catalyse the housing market and boost confidence”, the market has seen average house prices and mortgage borrowing hit record highs.

But how will the market fare when the current stamp duty holiday ends on June 30?

April slowdown

Statistics show a fall in mortgage borrowing and transactions in the month after the stamp duty holiday was originally due to end.

The latest figures from the Bank of England show mortgage borrowing fell in April, with net borrowing at £3.3bn – down from the record of £11.5bn in the previous month, and lower than the monthly average of £5.7bn borrowed in the six months to February.

And provisional figures from HM Revenue & Customs show residential property transactions dropped to an estimated 111,260 in April, down by more than a third from 173,410 in March (non-seasonally adjusted).

House prices, meanwhile, rose in April, with Nationwide’s index showing prices were up by 2.1 per cent month-on-month, to reach an average of £238,831.

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The building society’s chief economist, Robert Gardner, says the extended tax relief prompted a “re-acceleration” in April, after the previous month saw a slowdown in house price growth in view of the original stamp duty holiday deadline.

However, Tim Bannister, property expert at Rightmove, expects market activity to remain strong for at least the rest of the year, despite the tapering and end of the stamp duty holiday in June and September.

Bannister says: “Right now many of the homes in the huge pipeline going through will not be expecting to make the June stamp duty deadline.”

Homebuyers who miss the June deadline for the stamp duty holiday will see the tax kick in above £250,000 of the property price until the end of September, in place of the current nil rate band of £500,000.

However, last month, a survey of more than 1,000 homebuyers by estate agent Barrows and Forrester revealed four in five (81 per cent) said they expected to miss the September deadline for the £250,000 threshold.

Coming out of lockdown

John Phillips, national operations director at estate agency group Spicerhaart, says the reopening of the hospitality and travel industries will have a greater impact on the market than the end of the stamp duty holiday.

Phillips says: “Buying a house will still be a priority for many, but there will be lots of people booking holidays after a year stuck in the UK and savings may be spent on a few weeks in the sun. This may result in a few people deciding to put a purchase on hold as the UK reopens fully.

“The slight dip in buyers will reduce the rate that house prices are increasing. However, this is a positive for the market, as the record increases were unsustainable long-term.”

Nationwide’s latest index shows annual house price growth reached a double figure of 10.9 per cent in May, the highest level recorded since August 2014.

Right now many of the homes in the huge pipeline going through will not be expecting to make the June stamp duty deadline.

Tim Bannister

Buying agent Henry Pryor also says a predicted increase in supply will help to moderate prices.

A record one in three properties (32 per cent) sold for more than the original asking price in April, according to NAEA Propertymark, compared to the previous record of 19 per cent in May 2014.

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Pryor says: “I expect supply to pick up as people start to be more confident about having strangers around their home. This will provide more choice for those wanting to buy and act as a slight dampener on prices.”

Although the housing market has remained open throughout subsequent lockdowns, government advice on moving home in England, for example, recommends homeowners vacate their property during viewings to minimise unnecessary contact.

Meanwhile, government figures show three-quarters of the adult population have had their first Covid-19 vaccine as of June 1.

Beth Rudolf, director of delivery at the Conveyancing Association, also says prices may experience a short-term “blip”, as more properties come onto the market when Covid restrictions are fully lifted and demand drops with the tapering of the stamp duty holiday.

Rudolf added: “As people decide to move to suit their new working arrangements, we might also expect more supply.”

Demand for space to continue

A survey of employers from professional body CIPD found two-thirds (63 per cent) planned to introduce or expand the use of hybrid working, as working from home became more commonplace last year.

Phillips says: “The shift to homeworking has increased the need for an extra bedroom to use as a study, or a garden to build an office in.

“There’s also been a trend away from city centres. Without the need to live in commutable distance from the office, people are moving to larger properties away from the often more expensive cities.”

Indeed, research from Nationwide in April found seven in 10 homeowners (68 per cent) would still be moving, or considering a move, if the stamp duty holiday had not been extended.

Buying a house will still be a priority for many, but there will be lots of people booking holidays after a year stuck in the UK and savings may be spent on a few weeks in the sun.

John Phillips

Nationwide’s Gardner added that shifting housing preferences after Covid was continuing to drive activity. Three in 10 actual and potential homemovers (28 per cent) cited a desire to access garden or outdoor space more easily, and one in five (22 per cent) to escape from a busy urban environment.

Although the country awaits the fourth and final step out of lockdown, buying agent Pryor does not think the demand for more space instigated by the lockdowns will change in the short-term.

Pryor says: “People who can move are looking for more flexible space; room to entertain, to homeschool, to work from home and if we aren’t able to go abroad, to spend the holidays in.

“This is a trend that I expect will continue for the next few years as we start to appreciate the changes brought by the pandemic.”

Kate Davies, executive director at the Intermediary Mortgage Lenders Association, says that while demand may soften following the stamp duty holiday, they do not anticipate a “cliff edge drop” in interest.

Davies says: “Many people are still keen to move irrespective of the holiday, with the Covid crisis having led people across the UK to reconsider their living arrangements.

“It does not seem logical that this trend will suddenly disappear, given the signs that there is still considerable demand in the pipeline, especially among those waiting for price growth to slow, but also from people who have chosen to wait for lockdown restrictions to ease before pressing ahead with a move.”

By Chloe Cheung

Source: FT Adviser

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Lenders hand out most mortgages to first-time buyers in nearly 20 years

Banks and building societies handed out more mortgages to first-time buyers in March than any time since 2002.

Across the UK, 42,330 mortgages were issued to first-time buyers in March, marking the highest monthly total since December 2002 when 44,000 were advanced, according to trade association UK Finance.

Many people who would have taken their first step on the property ladder last year may have put their plans on pause due to the coronavirus pandemic, with the market having been effectively shut for part of 2020.

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Last peak was in July 2002

A total of 58,810 mortgages were advanced in March to home movers, the highest figure since August 2007. The peak month for home mover activity was July 2004 when 93,500 mortgages were advanced.

The peak month for lending to first-time buyers on UK Finance’s records was July 2002, with 54,100 loans.

March 2021 was the original deadline for a stamp duty holiday in England and Northern Ireland, but the period has been extended.

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“Since the housing market emerged from its shutdown last spring, we have seen a remarkable recovery in demand, which continued through quarter one 2021,” said Eric Leenders, managing director of personal finance at UK Finance.

“Existing home owners have taken advantage of the stamp duty concessions, with changing working and living patterns encouraging more to use their existing equity, either to move further afield or to fund further housing purchases for themselves or family,” Leenders added.

By Michiel Willems

Source: City AM

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Intermediary confidence in the mortgage sector returns to pre-pandemic levels

Intermediary’s confidence in the mortgage industry has returned to pre-pandemic levels as businesses experience a rise in the number of cases being handled.

This is according to a new report by the Intermediary Mortgage Lenders Association (IMLA) which has quizzed brokers on their outlook during the first three months of 2021.

The trade association’s latest research recorded a 14% increase in the average annual number of cases handled by intermediaries between Q4 2020 (78) and Q1 2021 (89).

It means 96% of intermediaries are now confident about the future of the mortgage industry. A further 97% reported being confident about the intermediary sector and 99% saw a positive outlook for their own business.

It comes as the latest data from the Bank of England showed gross lending on all mortgages increased to £81.1 billion from £74.6 in Q4 2020.

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Conversion rates

In Q1 IMLA reported the business mix – the proportion of cases relating to different mortgage types – remained stable.

Two thirds (66%) of cases handled by advisers were for residential mortgages, a further 28% related to buy-to-let customers, and 6% were specialist.

However, the average number of DIPs processed by advisers increased from 25 to 28 between the final three months of 2020 and Q1 2021.

The conversion rate from DIP to completion also increased quarter-on-quarter with 43% in Q1 21 compared to 34% in Q4 20.

After a significant drop in the wake of the coronavirus crisis, the conversion rate from offer to completion increased dramatically from 65% in Q4 2020 to 75% in Q1 2021.

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The latest results show that almost two thirds of all applications resulted in a completion between January and March 2021. In Q1 2021, the rate reached 64%, compared to 68% in Q1 2020.

Kate Davies, executive director, IMLA said: “Following a difficult period in the wake of the coronavirus crisis which led to the temporary closure of the housing market, it is pleasing to see such a positive start to 2021.

“Our findings show that after a steady period of recovery, adviser activity levels and sentiment towards the outlook for the sector are now nearing levels not seen since before the start of the pandemic.

“We also expect this high demand to continue into the year, with a combination of Government support helping to underpin new purchases and a bumper year for product maturities also providing significant opportunity in the refinance market.”

Source: Mortgage Finance Gazette

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Number of Mortgage Deals Increases Between April and May According to New Data

The number of mortgage deals available to consumers increased by 85 between April and May, according to new data from Moneyfacts.

According to the organisation, which has just released its Moneyfacts UK Mortgage Trends Treasury Report, the number of deals available rose from 3,842 in April to 3,927. The vast majority of those deals were for those with a five per cent deposit, up from 34 deals in April to 112 in May, following the government’s announcement that it would help people with deposits up to a certain amount. Comparatively, those with a 10 per cent deposit saw the number of deals available to them rise by 41, going up from 440 to 481.

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Eleanor Williams, finance expert at Moneyfacts, said the increases were the result of lenders returning deals to the sector, partly because of the government’s scheme.

Along with the increase in product choice, the average two-year fixed rate on mortgage deals fell slightly between April and May, down from 2.58 per cent to 2.57 per cent. The average five-year fixed rate, however, increased slightly, up from 2.77 per cent to 2.79 per cent.

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Commenting on the results, Vikki Jefferies, proposition director at PRIMIS Mortgage Network, said: “The surge in the number of 95 per cent LTV deals available in the space of a month is particularly encouraging. There is clearly great momentum from lenders to return to the high LTV space – not forgetting those who have signed up to the government’s 95 per cent mortgage guarantee scheme – which is good news for first-time buyers and younger borrowers who are looking for low deposit mortgages.”


Source: Property Wire

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LMS: Remortgage completions up 4.7% in March

Remortgage completions volumes rose by 4.7% in March, according to LMS’ Monthly Remortgage Snapshot.

In addition, instruction volumes continued to rise, up 17.2% in January.

The cancellation rate increased by 0.5% to 7.45% in March, and pipeline figures rose by 12.8%.

The average monthly payment decrease for those who remortgaged in January was £238.

A total of 43% of borrowers increased their loan size, and 54% of those who remortgaged took out a 5-year fixed rate product which was the most popular product length.

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The most popular primary aim when remortgaging, at 33%, was to borrow more money.

The average loan increase post remortgage was £22,999, whilst the average loan decrease post remortgage was £15,523.

Nick Chadbourne, chief executive of LMS, said: “Remortgage instructions grew by nearly a quarter in March as the stamp duty holiday extension increased industry capacity by taking pressure off the purchase market.

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“March also brought the market right up to the five year anniversary of 2016’s stamp duty cut for buy-to-let purchasers, which will have contributed to the increase as many landlords begun the remortgage process as their 5-year fixes came to an end.

“These factors are the most likely cause for the pipeline growth as cancellations remained fairly steady.

“The purchase market is likely to retain the lion’s share of mortgage business through Q2 as government support such as the 95% government-backed LTV scheme and SDLT holiday continue to prop up an already busy market, but this balance should shift as the incentives offered by the stamp duty holiday reduce at the end of June.

“Remortgage-focused businesses should prepare for a growth in enquiries but shouldn’t abandon the other business streams which many have explored while purchases were on top – growth at any time should be seized with both hands, but those who are still reliant on old processes will struggle.”

By Jake Carter

Source: Mortgage Introducer

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Record mortgage borrowing in March as owners move or improve

UK homeowners borrowed a record £11.8bn more on mortgages than they repaid in March, according to figures from the Bank of England.

This net borrowing level was the highest of any month since comparable data began in 1993.

The market was stoked up by stamp duty holidays and by low mortgage rates.

These factors encouraged some homeowners to move in time to beat the tax relief deadline or to borrow more to improve their current property.

Mortgage borrowing signals future demand to buy homes, and analysts have said that the UK housing market has been “on the boil” during the spring.

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On Friday, the Nationwide Building Society said the average property price had risen by £15,916 in the year to the end of April, to reach £238,831.

Gross mortgage borrowing hit £35.6bn in March as some people tried to beat the end of the stamp duty holidays, which were then extended in England, Wales and Northern Ireland.

Andrew Montlake, from mortgage broker Coreco, said stamp duty relief was having an “insane effect” on the property market.

“This mad March mortgage data highlights the frenzied rush of people to buy in the second half of last year and save thousands of pounds on stamp duty,” he said.

“But the celebrations surrounding the stamp duty holiday may soon ring hollow if the market cools off and people find their savings have been wiped out by the premium they have paid for property. When borrowing is as extreme as this, it never tends to end well.”

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New scheme

In April, some High Street lenders started selling mortgages to borrowers offering a deposit of just 5% under a new government guarantee scheme aimed at helping first-time buyers.

The new scheme will be available to anyone buying a home costing up to £600,000, unless they are buy-to-let or second homes.

The government is offering a partial guarantee, generally of 15%, to compensate lenders if the borrower defaults on repayments.

House hunters, particularly first-time buyers, might be helped in their quest to have enough for a deposit by families and individuals saving more. The Bank of England said deposits into accounts “remained strong in March”. Some £16.2bn more was deposited than withdrawn, the data shows.

Households also continued to pay back more than they borrowed on non-mortgage debt in March, the Bank said. A net consumer credit repayment of £535m was recorded, including people’s borrowing using credit cards, personal loans and overdrafts.

By Kevin Peachey

Source: BBC

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Mortgage lenders prepare to launch new low deposit mortgages

Mortgage lenders in the UK are preparing to launch a wave of ultralow deposit deals on to the market.

Several big high street names have already confirmed their intention to participate in a new UK government-backed five per cent deposit scheme, which was unveiled by the Chancellor in the recent Budget.

Lenders who are participating in the new scheme include Lloyds, Natwest, Santander, Barclays, HSBC UK and Virgin Money.

Some lenders are expected to reveal further details about what they will have to offer in the coming days, The Scotsman reports.

The new mortgage guarantee scheme aims to increase the appetite of lenders across the UK for high loan-to-value lending (LTV) to creditworthy customers.

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It will be available to current homeowners as well as first-time buyers looking for a property for up to £600,000. Borrowers will still need to pass the usual affordability checks.

On the whole, the scheme can be used for new or existing properties and it will be open for applications from later this month until December 31 next year.

The initiative will work by allowing lenders to purchase a Government guarantee that would compensate them for a portion of their losses in the event of foreclosure.

The new scheme will mirror a “tried and tested” initiative which reinvigorated the mortgage market in the recent past.

In 2013, the government launched the Help to Buy mortgage guarantee scheme in response to a similar shortage of low-deposit mortgages following the 2008 financial crisis. The programme helped more than 100,000 households to buy their own home across the UK.

The previous Help to Buy scheme also had the effect of boosting competition in the 5 per cent deposit bracket among lenders who were not part of the scheme.

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They ramped up their low-deposit ranges in order to compete with lenders taking part in the initiative.

Lloyds Banking Group confirmed that its new deals will be available across its brands, Lloyds Bank, Bank of Scotland, and direct from Halifax, as well as through Halifax Intermediaries.

The bank said that two-year and five-year product options will be made available.

A Santander spokeswoman said: “We’re pleased to be supporting the Government’s 95% mortgage guarantee scheme and look forward to sharing full details of the products available shortly.”

A spokesman for Virgin Money said: “We will be an active participant in the Government’s mortgage guarantee scheme and we are due to announce our proposition next month.”

Source: Scottish Construction Now

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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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More Mortgages Agreed by Lenders in Early 2021

Mortgage commitments agreed by lenders were a quarter more at the end of 2020 than at the end of 2019, the private investor platform Hargreaves Lansdown has highlighted.

Advances actually paid in the fourth quarter of 2020) were also up on the same quarter a year earlier, but this time by only 4.2 per cent. In the year as a whole they were unsurprisingly down by 9.8 per cent.

The value of balances in arrears rose by 3.4 per cent in the last quarter and is now just under 1 per cent of all mortgage balances.

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‘The race for space has turned out to be more of a marathon than a sprint’, said Hargreaves Lansdown personal finance analyst Sarah Coles.

‘We’ve been snapping up mortgages at the fastest rate since the onset of the financial crisis – and that was even before we knew the stamp duty holiday would be extended.

‘The mortgage market was booming at the end of last year, and the mortgages being agreed for the start of 2021 were at their highest for 14 years’.

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Meanwhile, arrears are starting to grow, said Coles. But ‘let’s not get ahead of ourselves, arrears are still incredibly low: right now they’re at 0.93 per cent compared to 3.64 per cent in early 2009. However, during the pandemic millions of borrowers have been able to rely on payment holidays, so have been able to avoid paying without running up arrears. Now that support is winding down, anyone who’s still struggling is running out of road. When the FCA asked people in October, 19.6m expected to be struggling to pay the bills or service their debts by April. By the time we get the March figures, arrears could look much worse’.

Source: Landlord Knowledge

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