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Low deposit mortgage deals at six-month high

The mortgage market has shown signs of recovery as the number of 90% loan to value (LTV) products reached a six-month high while overall choice has improved.

The number of low deposit mortgages almost doubled from 72 to 160, according to a Moneyfacts report.

However, those who require a 90% LTV mortgage still have fewer options than those with more money to put down. Borrowers who qualify for an 85% LTV mortgage have 439 products to choose from and 75% LTV borrowers have 629.

In total, there are currently 2,893 residential mortgages on the market, the most recorded since April 2020 when there were 3,192 mortgages available. This is up slightly from the 2,782 on the market last month.

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Rates on the up

The average rate for a two-year fixed mortgage across all LTVs rose for the sixth month in a row by 0.03% to 2.52%, the highest average rate since January 2019.

The average two-year fixed rate is also 0.08% higher year-on-year and a 0.53% rise on the record low seen in July. The record low rate coincided with a period when there were just 70 high LTV products on the market, where higher rates are typically seen.

The average rate for a five-year fixed deal across all tiers also increased in January from 2.69% to 2.71%. However, this was lower than the average rate of 2.74% during the same month last year.

As well as returning to the market to serve borrowers with a smaller deposit, lenders also appear to be treating those in need of a 90% LTV more favourably by reducing borrowing costs.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

The average rate for a two-year fixed mortgage at this tier dropped from 3.79% to 3.65% over the month while a five-year fix fell from 3.92% to 3.79%.

Eleanor Williams, spokesperson at Moneyfacts, said: “Following the sharp drop off in availability in 2020, it is positive to see we are beginning 2021 with the total number of mortgage deals rising for the third consecutive month.

“Not only is the increase in product choice a positive for borrowers, but it seems that a measure of competition may have started to return to some sectors as well.”

She added: “This improvement in options for mortgage borrowers has occurred at a time when high levels of borrower demand have been fuelled by those hoping to benefit from the stamp duty holiday and by those who re-evaluated what they want from a home and were part of the unleashed demand that arose after the first lockdown in 2020.”

Written by: Shekina Tuahene

Source: Your Money

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Mortgage approvals at 13-year high

UK lenders approved 97,532 mortgages in October, the most since September 2007, the Bank of England’s Money and Credit data shows.

The housing market has gotten busier, as there were 92,091 given the green light in September, compared to 85,704 in August.

Before the pandemic the were 73,384 mortgages approved in February, before the amount fell as low at 9,335 in May.

Nitesh Patel, strategic economist for Yorkshire Building Society, said: “The housing market continues to defy economic logic, despite challenging economic conditions caused by the global Covid-19 pandemic and uncertainty over the UK’s trading deal with the EU.

“Pent-up demand from the lockdown has been driven by buyers looking for bigger homes that accommodate home working and more garden space, as well as the Stamp Duty cut may have drawn in opportunistic buyers who were previously discouraged by high transaction costs.

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“There is good reason to believe that homeowners with large amounts of equity in their homes are the most active, with first-time buyers making up a smaller proportion of approvals.

“These are temporary factors, particularly the Stamp Duty cut which, as it currently stands, ends on 31 March next year. With the economy set to remain weak and unemployment likely to rise when the job support scheme comes to an end, we should see housing activity start to decline in the second quarter of 2021.”

But Richard Pike, sales and marketing director at Phoebus Software, said: “It is not only the stamp duty saving that is driving the market, there is also the number of people looking to escape city life since the lockdown. And, as the ‘working from home’ culture continues this is likely to endure past the limitations imposed by Covid-19.

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“The problem then will be the age-old one of supply and demand. Despite the government’s promises, we are, according to the ONS last week, way behind our target for new housebuilding in the last year. With the knock-on effect of the pandemic, this is something that isn’t going to be fixed quickly. So, the mass exodus from our cities that has been predicted, could turn into a trickle come the spring.”

Tomer Aboody, director of property lender MT Finance, said: “This is an opportunity for many would-be buyers who in the past couldn’t afford or preferred not to buy, to go and purchase, locking themselves into a longer-term mortgage rate at an affordable level, and with a low enough deposit so that it doesn’t impact their savings too much. This, coupled with the stamp duty break, has fuelled the market and helped push up property prices.

“Unlike 2007, we should be confident in the banking sector, which is highly liquid, as well as confident in the market. We may be living with a pandemic but hopefully this will be under control before long, allowing us to carry on with our lives before too much damage is done to the economy.”

BY RYAN BEMBRIDGE

Source: Property Wire

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Low deposit mortgage deals double as lenders return to market

Mortgage borrowers with a 10% deposit now have almost double the choice of deals compared to September, as lenders have started trickling back into the market, analysis reveals.

There are 80 mortgage products available to borrowers today with a deposit or equity of 10% required, according to Moneyfacts.

At the start of September, there were only 44 deals available on the same basis.

In the past week alone, the number has jumped from 65 to 80, the data revealed.

Atom Bank, TSB and Platform are among the players to have added 90% Loan to Value (LTV) mortgages to the market this week.

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And Nationwide today announced it would expand lending at this level beyond first-time buyers.

The market for high LTV lending (low deposit) collapsed as the pandemic struck earlier this year, leaving many borrowers who could not scrape together bigger deposits with no option but to delay transactions.

In recent months, some lenders returned to 90% LTV lending for short stints of just a couple of days or, in some cases, only hours in an effort to manage volumes.

As more lenders filter back into the space, the pressure appears to be easing.

However, lending at 95% LTV remains very limited with still only eight products currently on the market.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

Eleanor Williams, spokesperson at Moneyfacts, said: “It is really encouraging that we are beginning to see more lenders relaunch products in the 90 per cent LTV bracket, especially for those borrowers with lower levels of deposit or equity who may have felt they had little to no options to move forwards with of late.

“We have seen a few lenders put their toe into the water of high LTV lending with short-term, limited edition products which were only on offer for a day or so, therefore seeing further providers enter this arena could be demonstrating that mortgage providers are managing their operational demands and are keen to cater to these borrowers.

“Those who are keen to take advantage of one of these 90 per cent LTV deals could do well to secure the support and guidance of a qualified, independent adviser who will be aware of the most up to date products available and be on hand to help borrowers navigate the mortgage maze.”

Written by: Lana Clements

Source: Your Money

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Boris Johnson plans low deposit mortgage scheme

Prime minister Boris Johnson has vowed to create ‘Generation Buy’ with a low deposit mortgage scheme that he says could be ‘revolutionary’ for young people.

First-time buyers have been finding it particularly hard to buy a property since the pandemic began as lenders have cut maximum loan to values (LTVs), meaning they require a bigger deposit to buy a home.

The stamp duty holiday in England and Northern Ireland was also granted to landlords and second home owners, further squeezing those looking to buy their first home as house prices have been pushed up and demand has increased.

In an interview with the Telegraph before the start of the Conservative Party conference, Johnson said a “huge” number of people were excluded from owning a home and he wanted to solve the problem with a mortgage scheme that permitted deposits as little as 5%.

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Speaking to the newspaper he said: “I think a huge, huge number of people feel totally excluded from capitalism, from the idea of home ownership, which is so vital for our society.

“And we’re going to fix that – Generation Buy is what we’re going for.”

According to the report, Johnson has asked his ministers to work on a scheme to encourage the availability of long-term fixed deals with 5% deposit mortgages.

The government withdrew the Help to Buy mortgage guarantee scheme at the end of 2016 which offered lenders the option to obtain a guarantee on a 95% mortgage.

If the borrower defaulted on the loan, the government would share in some of the losses.

In the two years it was available, the scheme helped to more than double the amount of 95% LTV deals available on the market.

Written by: Samantha Partington

Source: Your Money

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FCA announces extension of mortgage holidays

The Financial Conduct Authority (FCA) has confirmed the extension of mortgage holidays for consumers who still face financial difficulties, as well as those whose financial situation may be newly affected by coronavirus after the current FCA mortgage guidance ends.

The FCA has published additional guidance for firms meaning they must offer further short and longer-term support reflecting the circumstances of their customers. This could include extending the repayment term or restructuring of the mortgage.

Where consumers need further short-term support, firms can continue to offer arrangements for no or reduced payments for a specified period to give customers time to get back on track. This additional guidance will come into force on 16 September 2020.

Christopher Woolard, interim chief executive at the FCA, said: “Some consumers will continue to be impacted by coronavirus in the coming months, or be impacted for the first time. Consumers in these situations will benefit from firms providing them with tailored support.

“However, it is very important that consumers who can afford to resume mortgage payments should do so for their own long-term interests and so that help can be targeted at those most in need.”

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Under the guidance published today, firms will prioritise support for borrowers who are at most risk of harm, or who face the greatest financial difficulties.

The new guidance reinforces the need for firms to deliver outcomes that are right for individual borrowers rather than adopting “one size fits all” solutions. The FCA will be monitoring firms to ensure borrowers are treated fairly having regard to their individual circumstances.

The FCA has said that firms will also signpost borrowers to the support they need in managing their finances, including through self-help and money guidance, or refer borrowers to organisations that can provide free debt advice if this meets their needs and circumstances.

Where borrowers have taken, or are taking, payment deferrals under the existing guidance and require further support from lenders these further arrangements can be reflected on credit files in accordance with normal reporting processes. This also applies to borrowers newly affected by coronavirus who receive support from their lender after 31 October.

This will help to ensure that lenders have an accurate picture of consumers’ financial circumstances and reduce the risk of unaffordable lending. Firms are required to be clear about the credit file implications of any forms of support offered to borrowers.

The FCA’s current guidance published in June will continue to provide support for those impacted by coronavirus until 31 October 2020 – with consumers able to take a first or second three-month payment deferral until this date.

The June guidance is due to expire on 31 October and the FCA do not intend to extend this guidance. The guidance published today ensures consumers will still be able to obtain the support they need from their lenders after their payment holiday ends or they are newly affected by coronavirus after 31 October.

However, the watchdog has said it will keep the guidance under review and if circumstances change significantly, consideration will be given to any further measures that may be needed to support consumers during the ongoing pandemic.

Source: Scottish Housing News

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Skipton increases mortgage customer numbers by 9,456 in 2020

Skipton’s half year results show the building society has increased its mortgage customer numbers by 9,456 to 226,947 between 31 December 2019 and 30 June 2020.

The society ensured around 95% of its 88 branches remained open at any one time, albeit under reduced operating hours, during the pandemic.

90% of the society’s 1,500 head office colleagues worked from home, providing a contact centre facility for 50 hours every week.

During this period, Skipton achieved a net customer satisfaction score of 87%, compared to 86% as of 31 December 2019.

Skipton recorded underlying profits before tax of £47.9m, compared to £78.9m in the six months until 30 June 2019.

The society arranged more than 22,000 mortgage payment deferrals, and proactively called customers who had arranged a mortgage payment deferral to check they had all the information and support they needed.

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At its peak, 15% of borrowers had a mortgage payment deferral; as at 30 June 2020, this figure had reduced to 5%.

By 30 June 2020, 67% of the Society’s borrowers who had been granted a mortgage payment deferral had reached the end of their deferral period.

Of these, 13% elected to extend their deferral for up to another three months.

Of the remaining 87% who did not extend their mortgage payment deferral, 98% paid the full monthly amount due on their mortgage in the following month.

Group gross mortgage lending was £2.1bn during the pertiod, compared to £2.5bn during the same period the year before.

Mortgage balances grew by 4.7% since the end of 2019, and savings balances grew by 1.4%.

The society helped 12,376 homeowners to purchase or remortgage their properties during the period, including 2,369 first time buyers and 3,627 buy-to-let borrowers.

David Cutter, group chief executive at Skipton, said: “We went into this pandemic in a strong position with healthy levels of capital and liquidity, however undoubtedly profits are lower in a period where our focus has rightly been on the safety and well-being of our customers and colleagues.

“It is testament to the first-rate efforts of our people – all of whom have been impacted like everybody else across the country in so many different ways – that we have been able to quickly adapt and respond to continue to serve our customers well throughout these unprecedented times.

“Our Skipton Link video appointment service and the Skipton app really came into their own during the first six months of the year.

“Video appointments increased fivefold during the period and the number of mobile app users increased to 166,000.

“This enabled our customers to maintain face to face contact with us, together with having access to their accounts from their mobile phone.

“We also managed to help and reassure many more people through our social media and web chat customer services support, noticing big increases in customers reaching out to us through our digital platforms.

“It’s fair to say our financial results reflect a difficult time; our mortgages and savings division has been heavily impacted by increased impairment charges and our estate agency division, Connells, saw all of its UK branches have to close for two months.

“However, the resilience of Skipton’s business model has allowed the Society to maintain strong capital ratios throughout.”

Cutter added: “The COVID-19 pandemic has caused major social and economic disruption, and although the UK government has taken extraordinary steps to support people, public services and businesses, the impact on the general population is colossal.

“Whilst there remain significant uncertainties in assessing the long term social and financial impacts of the pandemic, Skipton remains forward-looking and focused on its purpose of meeting the short and long term interests of its members.

“Profits for the whole of 2020 will be significantly down on last year, and although Connells’ trading has been strong since the estate agency market re-opened, it is not yet clear whether this will be sustained or whether it is just due to pent up demand.

“Forecasting the outlook for house prices, unemployment and the housing market is extremely difficult at this moment in time.

“But the Society remains financially robust with a strong capital position and healthy levels of liquidity, and is in a good position to face the challenges ahead.”

By Jessica Bird

Source: Mortgage Introducer

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Nationwide enhances lending options for first-time buyers

Nationwide Building Society has increased the lending limit for first-time buyers following the government’s temporary changes to stamp duty regulations, to provide further support to them and the housing market.

The lender will offer 90% loan-to-value (LTV) mortgages for first-time buyers from Monday 20 July, with no set limit on the number of home loans available.

These will be available direct from Nationwide or via a broker; enhanced criteria will apply.

Existing mortgage members moving home will be able to continue borrowing up to 95% LTV, while for further advances, the maximum has increased to 90% LTV.

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Henry Jordan, director of mortgages at Nationwide Building Society, said: “First-time buyers are vital to breathing life into the housing market and economy.

“We understand one of the biggest barriers to homeownership is raising a deposit.

“As a building society, owned by our members, we are extremely well placed to look at ways of helping people into a home of their own.

“While we will continue to monitor the market carefully, we feel it is the right time to enhance our lending, initially to those looking for their first home.

“We welcome the government’s announcement on stamp duty and hope our combined changes create a positive impact on a market that, despite being in relatively good health, is still recovering.”

Miles Shipside, commercial director and housing market analyst at Rightmove, added: “The ability for lenders to offer lower deposit mortgages to first-time buyers is critical to helping the market recover more quickly.

“The stamp duty holiday is of limited benefit to those first-time buyers who are already exempt from it in many parts of the country, and so Nationwide’s return to 90% loan-to-value is likely to help significantly more for those trying to get their first step on the ladder.

“There’s been record demand for property on Rightmove since the market reopened which has been boosted even further by the stamp duty announcement, all of which should help activity levels over the coming months.”

By Jessica Bird

Source: Mortgage Introducer

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Borrowing is on the way to returning to healthy levels

Despite Bank of England figures that showed mortgage approvals hit a record low of 9,300 in May, there are signs that borrowing is returning to normal levels, according to Hometrack.

The Bank of England’s Money and Credit Report showed that households repaid more loans than they took out in May, but that there was still a small increase in mortgage borrowing.

On net, households borrowed an additional £1.2bn secured on their homes, higher than £0.0bn in April, but weak compared to an average of £4.1bn in the six months to February 2020.

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David Ross, managing director of Hometrack, said: “The data released by the Bank of England is encouraging and shows that borrowing, while not at pre-COVID levels, is certainly returning.

“On a more positive note our data for June shows continued growth and is up on the same period in 2019.”

For the market to return to normal, Ross added, providers must continue to innovate and focus on the customer.

He said: “Continued stimulus is key to maintaining this growth.

“We urge mortgage providers to focus on delivering the very best customer experience, removing complexity through digitisation and ensuring fewer barriers to borrowing.

“This in turn will help grow new lending, helping the economy get back on its feet after the shock of COVID.”

By Jessica Bird

Source: Mortgage Introducer

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Scottish Building Society scraps deposits for first-time buyers

Scottish Building Society are helping first-time buyers by scrapping deposits on new-build mortgages.

Under the Scottish government’s First Home Fund, prospective homeowners trying to get on the property ladder need to find a minimum of 5%.

However, the society has agreed to accept the 5% from house builders, removing the need for buyers to find the cash for a deposit.

Paul Denton, CEO at the Scottish Building Society, said: “As we seek to rebuild the economy post-COVID-19, it is important that as many people as possible have access to affordable housing.

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“We were proud to be one of the first lenders to take applications for the Scottish government’s First Home Fund. Getting a deposit together is the main barrier for customers trying to get on the property ladder; in some cases, one that has been exacerbated by the impact of lockdown on personal finances.

“Removing the requirement for buyers to find that 5% is good news for buyers and good news for a housing industry that is vital for Scotland’s future economic prosperity.

“This is a small but life-changing step and we would welcome further Government initiatives, such as a freeze in land tax, to accelerate the recovery.”

The First Home Fund was launched by First Minister Nicola Sturgeon to make the housing market fairer by providing a total of £150m until March 2021, helping at least 6,000 people buy their first home.

All first-time buyers in Scotland can apply for an interest-free loan of up to £25,000 towards the cost of a home, if at least 25% of the property cost is covered by a mortgage.

By Ryan Fowler

Source: Mortgage Introducer

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Homeowners set to be able to extend mortgage payment holidays

Those struggling to pay their mortgage due to coronavirus are set to be able to extend their payment holidays for three more months, or start making reduced payments, in proposals published today.

On 17 March, banks agreed with the Chancellor that they would offer ‘forbearance’ (tolerance and help) on mortgages, meaning they all should offer those struggling a three-month ‘holiday’, allowing customers a temporary break from having to make mortgage payments during this time.

Over 1.8 million mortgage payment holidays were taken up, and the first of these will be ending in June. But an extension of another three months will now likely be available.

The Financial Conduct Authority’s (FCA’s) new draft guidance also includes an extension of the application period for an initial mortgage holiday until 31 October 2020, so that customers who haven’t had a payment holiday and are experiencing financial difficulty will be able to ask for one.

The current ban on repossessions of homes will be continued until 31 October as well.

Full info on what the FCA expects mortgage lenders to do?

At the moment, these proposals aren’t confirmed. The FCA says it welcomes comments on them until 5pm on Tuesday 26 May, and then expects to confirm them shortly afterwards. Here’s what it’s proposing:

  • If you’ve not had a mortgage payment holiday, you’ll have until 31 October 2020 to apply. Customers who are making repayments now but get into financial difficulty later will be able to request a payment holiday until 31 October.
  • If your payment holiday’s ending, you can ask for another three months if you’re still struggling. Lenders should continue to support customers who have already had a payment holiday where they need further help, unless granting a further mortgage holiday would create its own financial difficulties.
  • Firms are expected to contact customers on mortgage payment holidays and find out what they can repay and, for those who remain in temporary financial difficulty, offer further support. As part of this, firms should consider a further three-month payment holiday.
  • If you can make full or partial payments, you should do so. At the end of a payment holiday, firms should find out if customers can resume payments, or part payments. If so, your lender should contact you to agree a plan on how the missed payments will be repaid, which could include spreading the cost of payments over the remaining mortgage term, or extending the mortgage term.
  • The current ban on repossessions of homes will be continued until 31 October 2020.
  • Payment holidays and partial payment holidays won’t go down as a missed payment on your credit file. However, the FCA says that consumers should remember that credit files aren’t the only source of information that lenders can use to assess how creditworthy someone is.

The FCA adds that these recommendations are minimum standards and that they don’t stop firms from going above and beyond, for example, by offering reduced interest.

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Buy-to-let mortgages aren’t technically covered by today’s announcement as they’re not regulated by the FCA. Yet if a lender is regulated for its residential mortgage business, the FCA says it also looks carefully at how these firms carry out their unregulated buy-to-let business, so it’s hoped that some mortgage lenders will offer the extensions to their landlord customers too.

What impact could a mortgage holiday have on my credit score?

As Martin and the FCA have pointed out, while mortgage payment holidays won’t be marked as missed payments on your credit report, they could still have an impact on your wider creditworthiness, as lenders can find out about them through bank statements or ‘Open Banking’ data, and can factor them in. As Martin says…

‘We wait to see how substantial the impact will be – but those who need a mortgage holiday should still do it’

The FCA has confirmed, sadly, that while credit files shouldn’t be impacted by mortgage or other payment holidays, lenders are still allowed to take them into account when making their acceptance decisions.

It’s impossible to say yet how widespread this will be or how substantial the impact will be – we’ll start to learn that over the next year. Each lender’s assessment process is different; it’s a dark art that’s hidden from the public and never published, so this is likely to be yet another factor applicants will need to navigate.

Certainly many new challenger financial firms talk about their new, more sophisticated customer assessment models, that they believe are better than just relying on credit files. It’s that very fact that sparked me to look at this in the first place. And as they will be able to see that someone has temporarily not paid their mortgage, they can spot payment holidays.

My hope is that as these holidays are specifically for the short-term financial hit of coronavirus – and as the practice is so widespread – it won’t be used by many firms, and where it is it won’t tarnish individuals’ credit reputation for too long. But there’s no real way to know.

Most importantly, I don’t believe this should stop anyone who needs a mortgage holiday from getting one – if it’s crucial for cash flow, just do it. Yet for those on the border, who may find it temporarily useful but can cope without it, add this to the fact that interest racks up during the payment holiday and I’d err on the side of caution.

What does the FCA say?

Christopher Woolard, FCA interim chief executive, said: “Our expectations are clear – anyone who continues to need help should get help from their lender. We expect firms to work with customers on the best options available for them, paying particular attention to the needs of their vulnerable customers, and to provide information on where to access help and advice.

“Where consumers can afford to restart mortgage payments, it is in their best interests to do so. But where they can’t, a range of further support will be available. People who are struggling and have not had a mortgage payment holiday will also continue to be able to apply until 31 October.”

By Callum Mason

Source: Money Saving Expert