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Over half of mortgage applicants rejected for reasons like being self-employed

Over half (54%) of mortgage applicants who’d fallen out of the application process were denied a home loan for reasons that could be considered ‘normal’ by most people, such as being self-employed or contract workers, Together has found.

Other factors once believed to be ‘non-standard’ include taking a dividend, or the type of property they were looking to buy, including conversions or high-rise flats.

Pete Ball, personal finance, chief executive at Together, said that many mainstream lenders needed to keep pace with the demands of these types of borrowers.

He said: “The world has changed. People’s pay, working patterns and pensions have altered beyond all recognition from 30 or 40 years ago.

“Even where they live, who they chose to live with, or the type of property they want to buy is vastly different from a generation earlier.

“What was previously thought to be ‘normal’ simply doesn’t exist anymore.”

Together’s study, which was conducted by market researchers YouGov, builds on earlier research by the Intermediary Mortgage Lenders’ Association, (IMLA) which revealed a significant proportion of the UK population fail to secure a home loan between an initial enquiry and the time they would receive a mortgage offer.

The latest survey discovered that, of those rejected, 12% were denied because of their employment type, while 3% had insufficient employment history. This could be despite potential borrowers being in a good position to repay their mortgages.

One in 10 (10%) were denied because the property they wanted to buy was considered ‘non-standard’, which could mean anything from a converted barn to a high-rise apartment.

Self-employed workers are also being “locked out” of the mortgage market by some lenders, Mr Ball said. Labour market data shows the population of people who are working for themselves has soared by a quarter in the past decade to 4.8 million, making them a cornerstone of the UK economy.

Millennials – those aged between 18 and 34 – were worst hit overall – with two thirds (66%) who took part in the survey failing to get on the housing ladder because of the way they live and work nowadays, which may mean they do not meet some mainstream lenders’ criteria

A total of 46% of over 55s were denied home loans, some because they were too near retirement age.

Ball though this could pose a growing problem in the future, as the age of the UK population rises, with the number of people aged 65 and over in England and Wales projected to increase by 65% to more than 16.4 million in 2033.

Andrew Montlake, of mortgage broker Coreco, said: “Across the country, people are living and working longer and have varying ideas of what their perfect home will be at different stages throughout their lives.

“Unfortunately, much of the mainstream mortgage market has been slow in catering for these potential borrowers, who make up a wide section of society. The market needs to continue to adapt to make sure it remains fit for purpose.”

Additionally, Together found nearly one in five (18%) people were turned down because they had a low credit score or a lack of credit history.

Surprisingly, fewer than one in 10 (9%) of said they’d been turned down because their deposit was too small and 16% said they were not earning enough to afford repayments on their home loan.

Over a quarter (27%) of rejected applicants who did not obtain a subsequent mortgage were put off ever going through the process again – shelving their dream of owning their own property – rising to 32% for over-55s.

Some one in 10 (10%) of those who withdrew a mortgage application/enquiry the last occasion they were unsuccessful pulled out before receiving an offer as they found the process too complicated, and 7% said there were too many stages.

A disappointing 28% who were originally unsuccessful have not secured a mortgage.

Ball said: “As a lender, we’ve been providing flexible, common sense lending for over 44 years, so we recognise that was once considered unusual or specialist is now becoming more normal, and the mainstream needs to be able to adapt to the changing world.”

Source: Mortgage Introducer

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Uncertainty in the UK

Gary Styles, director of GPS Economics, takes a look at the political and economic uncertainty and what that means for the mortgage and housing markets.

There was never going to be a good time in 2018 to assess the prospects for the mortgage and housing market whilst the machinations of Brexit continue and the dynamics of the world economy evolve. We all hope that the fog of uncertainty will lift in the next couple of months but we cannot be sure of that. Many of us believe that November will represent the time when we get down to brass tacks and a deal is finally agreed between the EU and the UK.

In the meantime, we all need to plan and in most cases to focus on the most likely outcome – however dull and ill-specified.

During the latest forecast round I have tried my best to ignore the vastly differing assessments coming from the respective vested parties as we all know they are unlikely to be correct. Our experience in the run up to the EU referendum in June 2016 has aptly demonstrated that even the most respectable economic houses and authorities get drawn into the political sphere and often damage their own long term reputations as a result.

The shifting UK economic background 
The UK economy and labour market have both been very supportive to the mortgage sector in recent years. GDP growth has averaged over 1.75% over the last two years and the unemployment rate fell from 5.1%% to 4.4% over the same period. The latest readings from the labour market show unemployment at 4% and regular average earnings growth of 2.9%, the highest earnings growth since mid-2015.

However, the UK’s overall growth performance hides a disappointingly unbalanced picture. The often promised investment and export-led growth has been replaced by the more typical pattern of debt and consumer-led growth.

The UK economy slowed sharply in the first half of 2018 although the more recent indicators for Q3 are far more encouraging with output up 0.7% in the three months to August. GDP growth for the whole of 2018 looks on track to be near 1.4%, which is still around 0.3% lower than in 2017 and well below trend.

Interest rates are expected to rise further in 2019 as import costs including fuel costs rise on the back of a weaker exchange rate and firmer global commodity prices. It seems likely that many commentators have underestimated how quickly interest rates will need to rise even against a backcloth of weak domestic output indicators.

Key mortgage and housing numbers 
The latest mortgage lending data for August from the Bank of England shows the mortgage market continuing to ease particularly in the house purchase market. The underlying number of house purchase approvals is down by around 2% when compared to the same period last year. The recovery in remortgage and other secured borrowing has helped to soften the speed of the overall slowdown but the direction of travel is clear.

We expect ONS annual house price growth to ease to around 2% by the end of 2018 with the Nationwide and Halifax annual growth measures between 0 and 2%. Assuming the UK negotiates an acceptable deal with the EU by November, house prices look set to ease by 1-2% during 2019 before recovering a little in 2020. The regional picture will be diverse with London and the South East weaker than the overall picture partly due to the disproportionate impact of higher mortgage interest rates.

Higher interest rates, weak transaction activity levels, squeezed real incomes and a somewhat uncertain medium term outlook will all act as a drag on the market. The gross mortgage market looks set to be around £265 billion in 2018 around 3% up on the £257 billion achieved in 2017. The composition of the market has shifted significantly but the total volumes remain lacklustre.
We expect total gross lending to ease to around £252 billion in 2019 and 2020. Net mortgage lending looks likely to fall sharply in 2019 as the rate of repayment continues to accelerate. In 2017 repayments of principal were running at 16.2% of the outstanding stock of mortgages and this appears to have risen to nearer 16.5%. We expect net mortgage lending to be around £40 billion in 2018 and less than £30 billion in 2019 and 2020.

Risks and issues 
We face a very uncertain six months or so as we navigate our way out of the EU and cope with the big upheavals in the world economy. It would be easy to fall into the trap of becoming too gloomy and ignore the underlying resilience of the UK economy. 2019 does not look like being a good year for the housing and mortgage market but the medium term prospects are far from negative.

Lenders need to be prepared for the risk of higher interest rates than widely expected and for more competition in the retail funding markets as the cycle progresses. The mortgage market is likely to look fragile in 2019 but if we can cope with the political and economic events of this year we can respond to most economic shocks. However, Mark Carney may well wish he had taken an earlier exit from the Bank of England rather than extending his pain into early 2020.

Source: Mortgage Finance Gazette

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Construction sector grows but uncertainty remains

Official figures released today have revealed that the UK construction industry has continued to grow over the last quarter despite uncertainty around Brexit. 

The IHS Markit/CIPS UK Construction Total Activity Index posted its second-highest level in 16 months at 53.2 in October, up from 52.1 in September.

However it was still some way below the long-run survey average of 54.3.

This was in part due to a slowdown in housebuilding across the UK which has put a drag on the construction industry.

Blane Perrotton, managing director of the national property consultancy and surveyors Naismiths, said: “The construction industry is enjoying an Indian Summer.

“True, the surge in output in the third quarter is flattered by comparison with the grim decline of the first quarter and the plodding indifference of the second. But this is real, and welcome, progress.

“Housebuilding retains its crown as both poster child and ‘get out of jail’ card for the industry as a whole. Housebuilders delivered a half billion boost to the industry in the third quarter, but elsewhere the growth was patchy at best. Infrastructure work remains in positive territory but output is down, with contractors focusing on finishing existing projects rather than starting new ones.

“Among developers there is a widening confidence gap between the overheated South East and other areas where demand is stronger and margins better.

“Despite a marked improvement in the Brexit mood music this week, months of deadlocked negotiations have choked investor appetite. Unless and until the political limbo is ended, the industry will continue its holding pattern of two steps forward and one step back.”

Source: Mortgage Introducer

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RICS: House prices, demand and supply all in decline

There has been a fall in interest from new house buyers leading to a more negative trend in house prices, according to the latest RICS UK Residential Market Survey.

While the regional picture remains varied, surveyors are doubtful that house sales momentum will pick-up over the coming months.

In the October survey, 10% more respondents saw a fall in house prices at the headline level. (-2% net balance previously). This is the weakest reading since September 2012, and mostly stems from London and the South East.

East Anglia, the South West and the North East also saw negative price balances, but prices continue to rise in other parts of the UK, with the strongest growth in Northern Ireland and Scotland.

Looking ahead, three-month price expectations are also slightly negative at a national level, and the national outlook for the year ahead is broadly flat.

First-time buyers

For those looking for their first properties, the market is relatively steady price wise. Reporting on properties listed at up to £500k and below, a slim majority of survey participants reported that sales prices have been at least level with ask prices.

However a third (34%) stated sales prices were coming in up to 5% below. Homes in the highest price brackets are noticeably below asking price.

New buyers

RICS says the weaker trend in prices is being driven by the lack of demand from new buyers, which is in part a result of heightened political uncertainty, ongoing affordability pressures, a modest upward move in interest rates and a lack of fresh stock coming onto the market.

In October, 14% more respondents reported a fall in buyer interest, which is the third report in a row in which demand has deteriorated.

Simon Rubinsohn, chief economist of RICS, commented: “Although the tone of much of the newsflow surrounding the housing market remains downbeat, this continues to disproportionately reflect developments in the south and east of England with the picture remaining rather more resilient in many other parts of the country.

“Uncertainty about the economic outlook on the back of the never-ending Brexit negotiations appears a key drag on sentiment according to respondents to the survey.”

Slowdown in new instructions

In terms of new instructions, and the supply pipeline, virtually all UK regions saw a further decline as average stock remains very close to an all-time low.

Furthermore, there appears little chance of any meaningful turnaround, as a net balance of 30% of respondents reported the number of appraisals to be down year on year.

October saw the third consecutive monthly decline in housing transactions and sales were reported to be either flat or negative across eleven of the twelve UK regions/countries.

Rents set to rise

In the lettings market, the quarterly (seasonally adjusted) data points to an improvement in tenant demand during the three months to October.

Alongside this however, landlord instructions continued to fall, remaining negative for a tenth straight quarter (the longest negative stretch since this series was formed in 1999). On the back of this, rents are expected to rise over the coming months albeit only modestly.

Source: Mortgage Finance Gazette

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Buoyant local housing market bucks the UK trend

HOUSE prices in the north have bucked the UK trend, with an increase reported last month, new figures show. Northern Ireland is the UK’s most buoyant housing market according to the RICS (Royal Institution of Chartered Surveyors) and Ulster Bank Residential Market Survey.

While UK prices dipped last month, surveyors in the north reported ongoing growth.

A net balance of 55 percent of local respondents said that house prices increased – the highest of all UK regions.

Local surveyors are also the most optimistic about the future, with a net balance of 35 per cent expecting prices to rise in the next months and 30 per cent predicting a boost in sales in the same timeframe.

By comparison most other regions expect prices and sales activity to fall or be broadly flat in the final quarter of the year.

There was a slight fall in newly agreed sales month-on-month, but there was an increase in new buyer enquiries, according to the survey.

In terms of supply, the survey pointed to a slight rise in properties coming onto the market in Northern Ireland for the first time in five months.

RICS residential property spokesman, Samuel Dickey said there is considerable positivity to be found from the latest figures.

“Interest from first time buyers and a strong rental have been two of the factors driving the Northern Ireland housing market, with first time buyers and investors both very active this year.”

“Surveyors remain confident about the market, despite political and economic uncertainty, and 2018 is shaping up to have been a more positive picture for the housing market than perhaps was initially anticipated,” Mr Dickey said.

Terry Robb, head of personal banking at Ulster Bank added:

“As the survey indicates, demand remains relatively strong and we continue to see a good-pipeline of mortgage applications. Our new paperless mortgage process has generated interest, but more fundamentally, interest in the market remains firm from a broad range of mortgage purchasers including first time buyers, home movers and those remortgaging.”

Source: Irish News

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Brexit Batters U.K. Housing as RICS Index Worst in Six Years

A key gauge of the U.K. housing market fell to the weakest since just after the financial crisis.

The Royal Institution of Chartered Surveyors said its index of prices fell to the lowest in six years in October, pointing to a modest drop in values. Uncertainty about the U.K.’s impending exit from the European Union and a lack of new buyers have battered the market, RICS said on Thursday.

The report follows others from Halifax and Nationwide Building Society showing slower house-price growth, though home ownership remains out of reach for many after a three-decade property boom. Brexit has furthered clouded the outlook as potential purchasers stay on the sidelines awaiting clarity on the U.K.’s divorce from the EU on March 29.

“Uncertainty about the economic outlook on the back of the never-ending Brexit negotiations appears a key drag on sentiment,” said Simon Rubinsohn, RICS chief economist. While prices remain more resilient in some parts of the country, negative news about the overall market primarily stems from the south and east of England, he said.

Respondents to the RICS survey were “doubtful” that U.K. sales momentum will pick-up over the coming months, as prices, demand and supply all decline. Here’s a roundup of some London agents’ views in the RICS survey:

Allan Fuller, Allan Fuller Estate Agents:

“The final quarter of the year traditionally sees a slowdown in sales, this year was more so due to Brexit uncertainty, some vendors switching to letting rather than take a drop on price.”

Ben Temple, Regent Property:

“The sales market is tough and only cheap properties get buyers interested.”

J.J. KING, Andrew Scott Robertson:

“Having reported more sales last month, the rate of fall-throughs has risen. Purchasers appear spooked, any form of negativity slows down sales. Negotiators are working very hard to retain sales.”

James Gubbins, Dauntons:

“The post-summer buyer activity has cooled. More and more buyers are saying they will delay a purchase until they know what the Brexit strategy is to be.”

Source: Investing

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North-South Property Price Divide To Shrink

The North-South property price divide is expected to shrink over the next five years according to new research.

Estate agents Savills are predicting an average property price rise of 14.8 per cent in England and Wales over the next five years, but they expect big variations across the country.

The North-South property price divide will become smaller as property values in the North West grow at the highest rate of 21.6 per cent, while values in the South East are expected to rise by 9.3 per cent, and London by just 4.5 per cent.

Savills has scaled back its predictions for London amid changing conditions in the housing market – with growth in the North and Midlands reversing some of the North-South property divide.

Savills believe that rather than Brexit it is more an affordability issue that is limiting the growth in house prices in the long term.

Savills head of residential research, Lucian Cook, explained: ‘Brexit angst is a major factor for market sentiment right now, particularly in London. But it’s the legacy of the global financial crisis – mortgage regulation in particular – combined with gradually rising interest rates that will really shape the market over the longer term.’

He continued: ‘That legacy will limit house price growth, but it should also protect the market from a correction.’

Savills also predicted however that the top end of the market in London would increase by significantly more, due to it being less dependent on mortgage borrowing.

Areas outside London and the South are expected to see stronger growth as prices are more affordable, leading to shrinkage of the North-South divide.

However, the opposite is expected for growth in rents over the next five years, with Savills predicting rental growth of 13.7 per cent countrywide, but slightly higher in London at 15.9 per cent.

That would result in typical rents for a two-bedroom property rising from their current level of £793 to £902 by 2023. In London, the rise would be from £1,572 to £1,822.

Source: Residential Landlord

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Buy-to-let mortgage lending for house purchase falls way short of forecasts

The trade body for the mortgage sector has warned that buy-to-let purchase lending is set to come in at below its forecasts for 2018.

UK Finance had predicted £12bn of buy-to-let lending for house purchase this year, but Jackie Bennett, director of mortgages, has warned this is heading for around £9bn.

Speaking at UK Finance’s annual mortgage conference, she said: “Our forecast for 2018 was for around £12bn for buy-to-let purchase. The market looks like it will considerably undershoot this, coming in more around £9bn.

“This is undoubtedly the impact of the various tax, regulatory and legislative changes that have happened to landlords in the buy-to-let sector.

“With the 2018 tax bills dropping through landlords’ letterboxes, or more likely in their inboxes these days, we are yet to see what further impact this may have on the market.”

She was more positive about the overall mortgage market, predicting gross lending would hit a decade-high of £270bn this year.

Bennett also expressed caution about the growth of online mortgage brokers.

She said: “The Financial Conduct Authority  wants it to be easier for customers to understand the products they may be eligible for earlier in the process. This is a laudable aim.

“However, as customers have ever more complex circumstances – multiple incomes, self-employment, contracting to name but a few – it is more difficult for any ‘tool’ to narrow down the products available for a particular customer. Based on our conversations with lenders it would take several hundred questions to ensure that all bases were covered.

“That’s not to say that technology developments won’t help more standard customers – they will do and they are – but I think we have to be realistic about what proportion of the market can be served in this way.”

Source: Property Industry Eye

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London house prices set to slide as caution lingers in the UK property market

Fears of flat activity in London’s housing market were underlined by a new closely-followed survey this morning, which suggested property prices will continue to sink as buyer caution looms over the capital.

According to data released today from the Royal Institution of Chartered Surveyors, 41 per cent more respondents have predicted a further fall rather than a rise in house prices over the next three months.

However, some 47 per cent more respondents also said they witnessed a drop as opposed to a bump in London property prices during October, improving from the same month last year when 67 per cent more respondents reported weakened prices.

“The London numbers remain disappointing with current activity subdued and the forward-looking indicators providing little prospect of an improvement anytime soon. Ongoing uncertainty about what a Brexit deal, or a no-deal outcome, might mean for the capital’s economy is clearly weighing on sentiment at the present time,” according to Rics chief economist Simon Rubinsohn.

He added: “But it is not the only issue holding back potential purchasers. At the higher end, stamp duty land tax remains a key impediment while elsewhere, affordability/ deposit requirements present a greater challenge. Unfortunately, I struggle to see where relief for either of these obstacles likely to come from.

The news comes a day after the Halifax house price index showed that property values in the UK slowed to their lowest annual rate of growth in more than five years last month.

Brian Murphy, head of lending for Mortgage Advice Bureau, said: “What would appear to be consistent.. is the continuing lack of properties available as even in those areas where demand is still significant and prices are still on the ascendant, the numbers of new listings over the last month would appear to have remained subdued. This may well assist with underpinning current values in some areas where demand is significant, although in others a lack of homes being listed for sale may add to the current market malaise as buyers can’t find what they are looking for, leading to a stagnating environment.”

Source: City A.M.

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Mortgage rates on the rise

The cost of the most popular two, three and five year mortgages has increased over the past three months after two quarters of cost reduction, new data have shown.

With a current rate of 2.27 per cent (as of 1 November 2018), the cost of a typical 60 per cent LTV five-year fixed rate mortgage is now 2 per cent higher than it was in August, according to product analysis provider Mortgage Brain.

At the same time some two, three and five year fixed rate mortgages have recorded increases of 1 per cent.

The Bank of England increased the base rate of interest from 0.5 per cent to 0.75 per cent in the beginning of August and has kept it there since.

Since the start of August, the cost of a 70 per cent and 80 per cent LTV two year tracker has increased by 4 per cent, while its 60 per cent and 90 per cent counterparts have increased by 3 per cent over the same period, according to Mortgage Brain.

Based on a £150k mortgage, borrowers looking to take out one of these mortgages now face an annualised increase of up to £288, the provider said.

Mark Lofthouse, CEO of Mortgage Brain, said: “With the Bank of England maintaining the base rate at 0.75 per cent for the third consecutive month, it’s looking more and more likely that any future rate increases will be at a slow and gradual pace.

“A lot of the movement that we saw in our latest product analysis has happened since the start of September, however, so once again, the UK mortgage market could be on the verge of change where we revert back to seeing a period of increases in the cost of residential mortgages.”

For the first time in many months, Mortgage Brain’s longer term analysis also showed a number of annual cost increases.

The cost of the 70 per cent two year tracker, for example, is now 5 per cent higher than it was at the start
of November 2017, while a 2 per cent increase in cost has been recorded for some two and five year fixed rate mortgages too.

Kevin Roberts, director at Legal & General Mortgage Club, said despite the increases mortgage rates continued to remain at near-record lows and there was a growing number of innovative solutions, particularly for first-time buyers and retirees available on the market.

Andrew Montlake, director at mortgage broker Coreco, agreed. He said: “Specialist mortgage lenders, most of whom only go through brokers, have some really good offerings in this arena at present and there is no need for any borrower to feel that they have no options.”

Source: FT Adviser