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First-time buyer mortgage market set to beat predictions and reach record highs in 2024

The first-time buyer market has proven resilient this year, despite historic headwinds, analysis from Yorkshire Building Society has revealed.

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In partnership with business consultancy CACI, the society’s research found that first-time buyers make up a higher proportion of the home purchase market than at any time since the business consultancy began measuring such market statistics in 2016.

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The mutual has seen overall mortgage applications rise by almost a quarter in 2024, despite forecasts from UK Finance that gross lending would be lower in 2024 than it was in 2023.

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Source: The Intermediary

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Five-year mortgage rate hits 6% in yet more misery for homeowners

The average five-year fixed-rate mortgage has risen above 6% for the first time since November last year.

The typical rate across all deposit sizes was 6.01% on Tuesday, up from an average rate of 5.97% on Monday, according to financial information website Moneyfacts.

It is the highest level since former chancellor Kwasi Kwarteng’s mini-budget in November.

Meanwhile the average two-year rate nearly surged past 6.5%.

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Nearly 90% of outstanding mortgages are on fixed rates – many of which were taken out when home loans were at 2% or less.

It comes as the Bank of England pushed the UK base interest rate to 5% last month, opting for a bigger hike than most economists were expecting.

It marked the 13th time in a row that the central bank has pushed up rates, in efforts to quell rampant inflation across the UK.

The Financial Conduct Authority watchdog will hold a meeting with HSBC, NatWest, Barclays, and Lloyds for a meeting on Thursday after bankers have been accused of dragging their feet in passing on interest rate rises to savers.

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Government minister Johnny Mercer said homeowners needed to ‘hold their nerve’ over inflation, telling Sky News ‘things will get better’.

Lib Dem MP and Treasury spokeswoman Sarah Olney urged the Government to do more in response to climbing mortgage rates.

She said: ‘This is yet more mortgage misery for homeowners on the brink.

‘Rishi Sunak asking homeowners to hold their nerve is sounding more tin-eared by the day.

‘It shows this Conservative Government is just totally out of touch.

‘Conservative ministers sent mortgages spiralling through all their chaos and incompetence, now they are refusing to lift a finger to help.’

By Brooke Davies

Source: Metro

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Skipton launches deposit-free mortgage aimed at renters

A deposit-free mortgage specifically aimed at people currently renting has been launched by a UK building society.

While a handful of other no-deposit deals are available, they all need the financial backing of family or friends.

Skipton Building Society says while its deal requires 12 months of on-time rental payments and a good credit history, it does not need a guarantor.

However, at 5.49% the interest rate is more expensive than the average five-year fix of 5%.

Generation Rent, which campaigns on behalf of private renters, says the shortage of affordable properties within the budget of first-time buyers is still the main stumbling block for those struggling to get on the property ladder.

“It’s not necessarily going to help all the people who are looking to buy a first-time home if there aren’t more houses available to buy,” says Will Barber Taylor from Generation Rent.

Currently there are 15 other zero-deposit products on the market, according to financial data firm Moneyfacts, accounting for just under 0.3% of the UK market.

First-time buyers are facing an uphill battle. Rapidly rising rents have made saving for a deposit increasingly difficult, at the same time that the government’s flagship Help to Buy scheme, aimed at helping first-time buyers, is no longer open.

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The Skipton, which is the UK’s fourth biggest building society, says it recognised a “gap in the market”.

Stuart Haire, the society’s chief executive, told the BBC that “until now there has been no solution for them [renters] to buy a property due to a lack of savings or access to family wealth”.

David is renting with his partner and new baby in North Yorkshire. “It’s getting that deposit together that’s really difficult with rent prices,” admits David.

“If I can prove I’ve been paying rent for the last 10 years of my life why can’t I have a mortgage.”

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The government’s Help to Buy scheme saw the Treasury lending homebuyers between 5% and 20% of the cost of a newly-built home, and up to 40% in London.

The scheme closed to new applicants in October 2022, but there are rumours that something along similar lines could be re-introduced.

But a rise in zero-deposit mortgages may not be welcomed by everyone, as riskier mortgages with a high loan to value were a root cause of the 2008 financial crash.

Mortgage expert Andrew Montlake says then lenders were just interested in volume rather than quality.

“The world is very different now,” he says, and adds that his opinion has changed over the past 15 years, as long as the 100% loan value mortgages are “underwritten sensibly”.

By Colletta Smith & Nicky Hudson

Source: BBC News

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Mortgage products rebound with second highest monthly increase taking total to over 5,000

Mortgage availability increased by 774 products in April to 5,146, the second largest monthly rise on record.

It marks the first time the number has risen above 5,000 since May 2022 and is the highest count since February 2022 when it stood at 5,356.

The only bigger monthly increase was October to November last year when 869 new products were launched, the data from Moneyfacts shows.

There are now more than double the number of home loans on the market than October 2022 at the height of the mortgage crisis when rates rose sharply in the mini-budget fall out.

Higher borrowing costs as a result of the unfunded list of commitments made by Liz Truss’ government forced lenders to withdraw products from the market and push up interest rates.

From September to October the number of products dropped by 42 per cent to 2,258. In November they recovered slightly to 3,117.

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For higher deposit deals, available mortgages at 60 per cent loan to value in April increased by 45 to a total of 702, the highest at that borrowing ratio on Moneyfacts’ record.

For borrowers with smaller deposits there is also an increase in choice. The 85 per cent LTV product bracket saw one of the largest rises over the month and at 806 available deals the tier is at the highest level on Moneyfacts records.

But, there is a sting in the tail. Mortgage rates have nudged higher this month for both two-year and five-year fixed rates. It is the first time this year average rates have increased over a month.

The two-year fixed rate average across all loans is 5.35 per cent and the five-year average is 5.05 per cent – this is up from 5.32 per cent on two years and 5 per cent on five years in March.

At the same time the average standard variable rate is now 7.3 per cent, the highest level since February 2008 when it hit 7.31 per cent.

A standard variable rate is the rate a lender moves you to when your fixed or tracker mortgage expires. They track the Bank of England base rate plus an additional charge.

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Rachel Springall, of Moneyfacts, said: ‘Interest rate competition among lenders was mixed in the past month, however it is widely expected that fixed mortgage rates will reduce over the next few months, but this will be determined by fluctuating swap rates and lenders appetite for business.

‘Those borrowers with a large deposit or equity may be pleased to see the average rates at 60 per cent loan-to-value for a two-year or five-year fixed mortgage stand below 5 per cent.’

However, for those who coming off a two-year fixed mortgage and wish to refinance on the same term (60 per cent LTV) face a shock.

The average rate on a two-year fixed mortgage in April 2021 was 1.63 per cent, compared to 4.95 per cent for April 2023.

This significant rise in rates means that for a £200,000 mortgage over 25 years a borrower would have paid £812 a month two years ago would now pay £1,163 – an increase of £351.

Earlier this year a brief rates war between lenders saw some fixed deals dip to as low as 3.75 per cent. However, they have since risen again but there are still deals below 4 per cent on offer.

By Fran Ivens

Source: This is Money

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UK mortgage approvals rise for first time in six months

Collapse in demand for property may be bottoming out but no return to boom conditions, analysts say.

Mortgage approvals rose for the first time in six months in February amid signs that the collapse in demand for property seen last autumn might be bottoming out.

Figures from the Bank of England showed that home loan approvals rose from 39,647 in January to 43,536 in February – reversing a downward trend in place since August 2022.

But analysts said that with interest rates rising there was no prospect of the market returning to the boom conditions seen during the pandemic and its aftermath, with one predicting that activity would be 30% lower in 2023 than in 2022.

In a sign of the turbulent conditions seen during Liz Truss’s brief premiership last autumn, the Bank said net mortgage lending dropped from £2bn in January to £0.7bn in February, the lowest since April 2016 apart from when the economy was locked down during the Covid pandemic. It usually takes several months for approvals to be turned into actual home loans.

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Andrew Wishart, UK property analyst at the consultancy Capital Economics, said: “Reflecting the partial unwinding of the spike in mortgage rates following the ‘mini’ budget, mortgage approvals rose to their highest level for three months in February. However, with mortgage rates unlikely to fall much further in the near term, lending will remain weak. Our forecast is that approvals will be 30% lower this year than in 2022.”

The Bank – which raised official interest rates for an 11th successive time to 4.25% last week – said the cost of servicing a mortgage was rising. The effective home loan rate – the interest paid by a new borrower – rose by 0.36 percentage points to 4.28% last month.

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Martin Beck, chief economic adviser to the EY Item Club, says: “The latest household lending data indicated continued weakness in housing market activity, albeit with signs that the worst may be in the past.” Approvals were still well below the average of 62,677 recorded in 2022, he added.

The Bank of England’s monthly money and credit report also showed consumers borrowing more in order to finance their spending. Consumer credit rose by £1.4bn in February – split almost evenly between credit cards and other forms of borrowing.

By Larry Elliott

Source: The Guardian

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Four-day week ‘would not work for mortgage market’ ‒ analysis

A four-day working week is a good idea in theory, but not really compatible with the workload of a typical mortgage broker, according to intermediaries.

Last week saw the publication of the results of a trial into a four-day week, with the majority of firms stating that not only had it improved performance but that they were continuing with the structure.

However, when quizzed by Mortgage Solutions, mortgage brokers were split on the idea of a four-day working week. Advocates argued it had helped them to be more productive, working smarter during the week, though there was scepticism about the impact it could have on delivering adequate service to clients.

Boosting productivity

One mortgage broker who is already working a four-day week is Samantha Bickford, mortgage and equity release specialist at Clarity Wealth Management.

She said that since going self-employed, she has worked on the basis of usually having Frdays off, arguing that it leads to a healthier work/life balance.

“This encourages me to be more productive, work harder and smarter during the week, knowing I am taking a day or even an afternoon or few hours for myself at the end of the week. Especially with those dedicating their weekends to their children and family time, this means you have a day for yourself and your own mental health,” she explained.

Gary Boakes, director of Verve Financial, said that he too had been working a four-day week until recently, noting that he “felt I needed the extra time during the day to work on the business rather than in the evening”.

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Maintaining service levels

Stuart Powell, managing director of Ocean Equity Release, said that while he was all for a four-day working week in theory, it presented a challenge for smaller firms in ensuring such a structure did not impact their customer service levels.

“Many firms give people different days off, however for firms with less than five staff, this may reduce coverage for clients and be an issue in holiday times,” he added.

Bickford agreed that fitting in with client expectations and lender service challenges can make picking working hours more challenging.

She said: “If the working week dictates I need to work on a Friday ‒ for example, if this is most convenient for the client or if the week is so busy it is not possible to take the Friday off ‒ I will of course, but in general I believe a four-day week encourages productivity. I have no qualms about working slightly longer days during the week to have this balance.”

Are we working at capacity?

However, not all brokers believe it is a workable option.

There is “no way” a business that interacts directly with the public could succeed with a four-day week, according to Craig Fish, director of Lodestone Mortgages & Protection, who noted that there are times when even not working on a weekend will have an impact on a broker’s business.

He added: “Lenders could make things easier by improving their systems, but the costs involved to do this are likely prohibitive, so I fear that brokers will find themselves working ever longer hours to ensure that the client is getting a first-class service.”

If advisers are able to do the same amount of work in four days that they were doing in five, then they are not working close to their capacity, suggested Andy Wilson, director of Andy Wilson Financial Services.

He added: “I believe most brokers will work quite long and unsociable hours if they want to meet their own and the business’s targets. I also feel most would exceed the four days just to get jobs done and get cases through more quickly.”

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It might work for other industries, but not mortgages

Dominik Lipnicki, director of Your Mortgage Decisions, said that he was sceptical of how practical a four-day week would be for most businesses, noting that while he was a fan of flexible hours, “our clients would rightly expect to be able to be assisted at the very least five days per week”.

He continued: “I am not sure that many mortgage businesses would be able to afford to hire more staff to cover the extra day and if they did, surely, it is the clients who ultimately pay? I think that for some businesses, a four day week might work but that would very much be driven by the type of business that it is.”

This was echoed by Benjamin Blyth, director of Houz Mortgages, who suggested a four-day week does not really suit the mortgage industry as a whole. “We need the engine running seven days a week, but if a four-day week can be scheduled into rotas, it’s great for staff. I can never tie myself to four days because client demand will always vary across the seven days in a week.”

Working smarter, not harder

While many brokers were unconvinced about the merits of a four-day week, there was near consensus that technological developments had given them more control over the actual hours worked.

Chris Barker, managing director of Manchester Money, said that technology today means brokers can “pretty much work what hours they want, and from wherever they want to be, as long as it fits with their clients’ needs”.

Paul Seed, mortgage and insurance adviser at Mortgages 4 U, noted that meeting client expectations was now more about the response times rather than the hours or days worked.

He continued: “Speed of response, especially with live applications, is increasingly critical to maintain a client’s trust. People want to know that they are in safe and responsive hands.”

Embracing the benefits of flexible working can also deliver a better standard of service, too, some suggested. For example, Kylie-Ann Gatecliffe, director at KAG Financial, said that her firm is smarter now in working around clients, removing the need to pull 70-hour weeks.

She continued: “We actually produce higher results, coming in feeling fresh and motivated. Whilst clients can still have appointments on an evening and on a weekend when required, we plan our diaries so the whole team have a balanced week, rather than everyone being stressed and under pressure trying to juggle life/work balance.”

By John Fitzsimons

Source: Mortgage Solutions

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Mortgage Approvals Down but Sunnier Days Ahead for The Property Market in 2023

Recent uncertainty in the property market during the closing stages of 2022 has led to the number of mortgage approvals declining by -20% in the past year, while the number of remortgaging approvals has soared as existing homeowners stay put and look to stabilise their financial foundations by borrowing more.

The cost of living crisis and increasing price of borrowing has had a significant effect on the mortgage sector.

In 2021, there were a total of 944,704 house purchase mortgage approvals in the UK. In 2022, this dropped to 753,946 approvals, marking an annual decline of -20.2%.

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Financial concerns induced by the cost of living crisis clearly caused many potential buyers to postpone their plans in 2022, not least due to the fact that mortgage prices shot up seemingly overnight following the shambolic mini budget unveiled by the government in September of last year.

At the same time, the number of remortgaging approvals increased from 460,462 to 539,528 between 2021 and 2022, an annual rise of 17.2%.

This serves as further evidence of public concern brought on by recent economic uncertainties, with more homeowners trying to reduce their mortgage rates or release some equity to fund soaring costs elsewhere in their lives.

These market trends are further supported when analysing the overall monetary value of mortgage approvals.

In 2021, the total value of property purchase approvals was £208bn. In 2022, this dropped to £176bn, a decline of -15.3%.

At the same time, the overall value of remortgaging approvals increased from £92bn to £113bn, marking a 22.6% rise.

However, while the total value of homebuyer mortgages has fallen, the average value of each individual approval has actually increased by 6.2%, from £219,899 in 2021, to £233,510 in 2022.

This shows that while the number of buyers entering the market has fallen, the amount each is borrowing has grown, as they tried to contend with house price highs that were driven by the pandemic market boom and, as of yet, have shown little signs of reducing.

The average value of a remortgaging approval has also increased, rising by 4.6% between 2021 and 2022.

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“Despite house prices continuing to climb in 2022, the immediate economic uncertainty that rattled the mortgage sector following September’s mini budget has had a notable impact when it comes to the number of mortgage approvals attributed to new house purchases in 2022.

At the same time, there has been a notable uplift in homeowners deciding to play it safe and stick with their current home, opting to remortgage in order to improve both their home and their financial stability.

However, mortgage rates are already on the decline so far this year, dropping by -14% in January alone.

On top of that, the wider economic outlook for 2023 is looking far brighter than many people feared towards the end of last year.

All in all, we expect spring and summer to bring sunnier days to the property market and a rejuvenated level of buyer activity to sweep the market.”

Source: Property Notify

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Green shoots of recovery appear in the mortgage market

Confidence in the mortgage market is showing healthy signs of recovery following the disruption of the mini-budget in September 2022, judging by the latest mortgage market tracker report from the Intermediary Mortgage Lenders Association (IMLA).

The average number of Decisions in Principle (DIPs) that intermediaries processed in Q4 fell slightly by two when compared to Q3 2022, reaching the level seen two years ago in the final quarter of 2020. Despite a drop in November (to 23 per intermediary), December saw a rebound, rising back up to 26 and matching the levels seen in July and August of 2022.

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In Q4, the conversions of DIPs to completions also fell very slightly by 1% from Q3 2022, down to 37%. The business area and region seeing the biggest drop in conversions were in directly authorised DIPs and brokers operating out of the South of England, seeing falls of 11% and 6% respectively during Q4. Conversions for first-time buyers and buy-to-lets also remained steady with slight falls of 3% and 2%, reflecting a strong mortgage pipeline in the face of the macro-economic challenges now facing FTBs and some BTL landlords.

The dent in confidence caused by the mini-budget and resultant market volatility was evident in the data, with 29% of intermediaries reporting in Q4 2022 that they were ‘not very confident’ about the outlook for the mortgage industry, rising from just 4% during the same time period in the previous year. However, the most prominent dip in confidence for Q4 was during October, with November and December showing signs of stabilisation – returning to a 70% proportion of intermediaries who felt either ‘fairly confident’ (56%) or ‘very confident’ (14%) in December.

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Comparatively, intermediary confidence in their own business declined only slightly. In Q4, 11% of intermediaries reported being ‘not very confident’ in the outlook for their business, rising from the 5% reporting the same in the previous quarter. However, overall, 87% of intermediaries still reported that they were either ‘very confident’ or ‘fairly confident’ in their own business outlook during the final quarter of 2022 – a dip of only 7% from Q3 despite the October disruption and rising interest rates.

Kate Davies, executive director of the IMLA, commented: “There are green shoots here, with December marking a noticeable increase in confidence compared to October. The Bank of England’s continuing action to bring inflation under control, combined with strong competition amongst lenders to attract new business, are good indicators of recovery.”

By Jerome Smail

Source: Property Industry Eye

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Britain’s biggest homebuilder hoping better mortgage deals could stimulate UK housing market

The average selling price of a Barratt home was up 13.6 per cent to £372,000 in the second half of 2022.

Britain’s biggest housebuilder said better mortgage deals could lead a recovery in the market this year.

Barratt Developments said things could start easing, after reservations dropped 57 per cent in the final months of 2022 – following the disastrous Liz Truss/Kwasi Kwarteng mini-Budget which caused a meltdown in the markets and higher interest rates.

The Leicestershire-based housebuilder has adopted a cautious approach to the year ahead despite a 16 per cent rise in pre-tax profits in the second half of 2022 to £501.6 million (compared to the second half of 2021).

Total sales for the half year were up almost a quarter at almost £2.8 billion – thanks to a “significant step-up” in the average selling price – with the average selling price of a Barratt home up 13.6 per cent to £372,000. The number of new home sales completed was up 7 per cent at 8,626.

The group – which is based in Coalville and includes Barratt Homes, David Wilson Homes and Barratt London as well as the Wilson Bowden commercial property arm – said it had seen a “modest uplift” in reservations this month, though they were still down 46 per cent lower on this time last year.

In recent months mortgage costs have gradually fallen back following actions to stabilise markets – including a new Prime Minister and Chancellor – and signs that wider interest rates may soon be peaking. Five-year fixed-rate mortgages are now available at below 4 per cent.

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Chief executive David Thomas said the “tremendous efforts” of its employees, sub-contractors and supply chain partners had helped it deliver a strong performance in the second half of 2022.

He said: “However, the economic backdrop has clearly been challenging and consumer confidence weakened significantly during the half, which meant we saw lower reservation rates for future sales – particularly in the second quarter.

“Whilst we have seen some early signs of improvement in current trading during January, we will need to see continued momentum over the coming months before we can be confident that these challenging trading conditions are easing.

“Our business remains fundamentally strong, both operationally and financially, with an experienced leadership team, a strong net cash position and a resilient and flexible business model.

“We are well-placed to navigate the challenges ahead and are focused on driving revenue whilst taking a decisive and disciplined approach to costs. As always, our priority is delivering excellent quality and service for our customers.”

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

Barratt said if the recovery in demand continues, it expects to deliver total home completions of between 16,500 to 17,000 in 2022-23, down from 17,908 in the previous year.

But house prices are still under pressure with figures on Tuesday showing annual growth slowed to its lowest level in three years last month.

Halifax said the average house price is now more than £12,000 below a peak seen in August last year.

By Tom Pegden

Source: Business Live

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Residential lending topped criteria changes in September

As the mortgage sector struggles with the uncertainty of future rate rises, tax changes and the cost-of-living crisis, broker’s criteria searches reveal a worrying decline in borrowers’ circumstances, the latest data from Knowledge Bank shows.

Knowledge Bank’s September criteria index reveals that 35% of all criteria changes during September were made to residential lending criteria.

The top search was for the maximum age at the end of the term as they look to spread repayments over the longest possible period.

However, the search for lenders accepting borrowers with late or missed payments entered the top five residential loan searches for the first time in six months.

Knowledge Bank suggests this shows a decline in borrowers’ financial circumstances.

The buy-to-let (BTL) sector accounted for 33% of all criteria changes during the month but the most common searches remained consistent with ‘lending to limited companies’ and ‘first time landlords’ the top two searches for the sixth month in a row.

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Meanwhile, the equity release sector saw the greatest shake up in criteria searches with three of the top five searches new from last month.

The most popular search was for equity release lenders who would lend on properties with an annex and, combined with the search for acceptance of debt management plans also in the top three.

Knowledge Bank says this suggests that borrowers are looking to consolidate their households.

The bridging and commercial sectors accounted for 15% of all changes during September but searches remained consistent with the top three in both categories unchanged from the month before.

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Knowledge Bank founder and chief executive Nicola Firth says: “Mortgage brokers continue to work tirelessly to place their clients’ mortgages in the face of daily product and criteria changes at an unprecedented level and this month revealed some worrying changes.”

“Brokers searching for lenders who will accept borrowers with missed or late payments made the top five searches for the first time in six months in both residential and secured loan searches.”

“Additionally, there were other signs that borrowers are in a declining financial position as they look to add lenders fees to the loans and the popularity of searches for equity release products for properties with an annex suggest households are consolidating their living arrangements.”

By Becky Bellamy

Source: Mortgage Finance Gazette