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BoE: Mortgage borrowing up by record £11.8bn in March

Mortgage borrowing saw a net increase of £11.8bn in March, the strongest since the Bank of England started publishing mortgage approval data in April 1993.

Lenders approved 82,735 mortgages in March which was down by 5,000 on February’s figure.

Mark Harris says: ’The strength of the runaway housing market is being reflected in the mortgage data, with strong levels of borrowing in March.

“With homeowners borrowing an additional £11.8bn, taking net borrowing to its strongest level since the series began in 1993, those who are not moving are taking the opportunity to improve, with cheap mortgage rates helping them make this decision.

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“With the stamp duty holiday originally expected to end in March, this focused borrowers’ minds and helps explain the uplift in lending. Now that this has been extended we expect activity to continue to be brisk over coming months, particularly as mortgage rates are likely to remain low and with increased availability of high loan-to-value deals.

“The trend to save continues with households depositing an additional £16.2bn in March, despite savings rates at historically low levels. This is an encouraging trend although it will be interesting to see whether it continues to the same extent as lockdown eases further.”

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Richard Pike, sales and marketing director at Phoebus Software, added: “We’re getting used to seeing these types of figures for mortgage approvals. The stamp duty holiday lit the fire and will continue to drive the market until it comes to an end. It is good to see the housing market as buoyant as it is, but it’s also causing some consternation.

“House prices are being driven up, with estate agents reporting many buyers offering over the asking price to secure their preferred property. How sustainable this is, when lenders are tied by strict affordability guidelines, is debatable.

“If the housing market is helping to drive the nations’ recovery in an unsustainable manner, will we be generating problems further down the track? Even with 95% mortgages available again the chances for many younger people, trying to get onto the property ladder, are becoming fewer as prices spiral upwards. At the moment it looks like we’re creating an unlevel playing field, especially for first-time buyers.”

Source: Mortgage Introducer

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House prices up by greatest margin since 2004

House prices rose by 2.1% in April 2021, representing the greatest monthly increase since February 2004, according to the Nationwide house price index.

House prices have reached a new record average high of £238,831, up £15,916 over the past 12 months.

On an annual basis, house price growth rebounded to 7.1% in April, from 5.7% in March.

Nationwide suggested that annual growth in house prices could reach double digits in June if prices are flat over next two months.

Robert Gardner, chief economist at Nationwide, said: “Just as expectations of the end of the stamp duty holiday led to a slowdown in house price growth in March, so the extension of the stamp duty holiday in the Budget prompted a reacceleration in April.

“However, our research suggests that while the stamp duty holiday is impacting the timing of housing transactions, for most people it is not the key motivating factor prompting them to move in the first place.

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“For example, amongst homeowners surveyed at the end of April that were either moving home or considering a move, three quarters said this would have been the case even if the stamp duty holiday had not been extended.

“Housing market activity is likely to remain fairly buoyant over the next six months as a result of the stamp duty extension and additional support for the labour market included in the Budget, especially given continued low borrowing costs and with many people still motivated to move as a result of changing housing preferences in the wake of the pandemic.

“With the stock of homes on the market relatively constrained, there is scope for annual house price growth to accelerate further in the coming months, especially given the low base for comparison in early summer last year.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, added: “The bounce-back highlighted by the Nationwide figures, which we have also seen on the ground, should be sufficient to ensure there is no price correction when the stamp duty holiday starts to taper off at the end of June.

“Continuing shortage of stock, as well as the new government-backed 95% mortgage and furlough support, are providing further assistance for the market.

“Broader rollout of the vaccine and easing of lockdown restrictions is increasing confidence in the economy.

“This economic recovery is giving an additional boost to housing market activity rather than the housing market supporting the economy, which was the case when the pandemic first struck.”

Tomer Aboody, director of MT Finance, said: “With continuous government support and stimulus, particularly the extension of stamp duty relief, house prices shot up in April.

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“Added to this the growing availability of 95% mortgages, and money being cheaper to borrow than ever, it is hard to see what is going to stop the housing market in its tracks this year.

“What the end of the stimulus will bring, we are not certain yet, but with economic uncertainty on the horizon, this artificial bubble could slowly deflate. That is the best-case scenario.

“The biggest factor is the lack of properties to buy, which is creating and overwhelming the pursuit of houses with gardens, which in turn is pushing up pricing.

“Will the government look to modify the stamp duty for downsizers in order to release more properties onto the market?

“This, along with the changing social environment with more flats being built in the centre and city of London, means a big cultural shift in society is on the horizon.”

By Jake Carter

Source: Mortgage Introducer

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Stamp Duty Land Tax transactions in Q1 up 48% annually

The total number of Stamp Duty Land Tax (SDLT) transactions in Q1 2021 was up 48% annually, according to HMRC data.

On a quarterly basis, the number of transactions was up 1%.

The increase in transactions in the last three quarters has likely been impacted by the introduction of the SDLT holiday for residential properties, helping offset the decrease caused by COVID-19.

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Residential property transactions in Q1 2021 were 2% higher than in Q4 2020, and 53% higher than in Q1 2020.

Non-residential property transactions in Q1 2021 were 7% lower than in Q4 2020, and 6% higher than in Q1 2020.

Total SDLT receipts in Q1 2021 were 8% lower than in Q4 2020 and total SDLT receipts in Q1 2021 were similar, up 1%, to those in Q1 2020.

The change in receipts has mainly been caused by the introduction of the SDLT holiday.

Residential property receipts in Q1 2021 were similar, within 1%, to both Q4 2020 and Q1 2020.

Non-residential property receipts in Q1 2021 were 24% lower than in Q4 2020, but 4% higher than in Q1 2020.

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Up to Q2 2020 there were 540,900 claims that have benefited from the relief, and the total amount relieved by these claims is £1,294m over the period.

An estimated total of 65,300 transactions were liable to HRAD in Q1 2021, with the 3% element generating £285m in receipts, an decrease of 16% from the previous quarter, and a fall of 15% compared to Q1 2020.

The percentage of residential receipts from HRAD transactions has dropped slightly by 3% to 46% when compared to both Q3 2020 and Q4 2020.

Vikki Jefferies, proposition director at PRIMIS Mortgage Network, said: “Today’s figures show a clear increase in Stamp Duty Land Tax transactions over the first quarter, underscoring the fact that the mortgage industry is continuing to recover from the impact of the COVID-19 crisis.

“There is no doubt that the Chancellor’s decision to extend the stamp duty tax break in his Budget announcement helped to fuel this activity by stimulating buyer appetite and boosting demand.

“As we approach the tapered extension of the stamp duty holiday, the priority for the mortgage market will be processing cases quickly and efficiently so that borrowers are able to benefit from the tax cut.

“In order to achieve this, key players in the market, including lenders, advisers, distributors, housebuilders, surveyors and conveyancers should work collaboratively to ensure that clients are best supported during this period and that the application process is as smooth as possible for all involved.’’

Cloe Atkinson, managing director at Mortgage Engine, added: “Today’s figures show once again just how frenzied activity in the housing market is.

“The release of pent-up demand for property has been super-charged by the stamp duty holiday extension.

“The tax holiday has certainly been a success by any metric and current activity levels are further proof of the resilience of brokers, lenders and borrowers alike.

“Over the last year, the virus has forced the industry to re-shape the way consumers buy property and led to a great deal of adaption and innovation to overcome the difficult conditions caused by the pandemic.

“Technology has been important for all parties in transitioning to this new way of completing purchases and the industry has seen a large increase in the use of tech solutions, such as remote viewings and automated valuation models.

“As the UK looks forward to the return of some pre-pandemic normality, tech-driven solutions will continue to be a vital part of the success of the mortgage market.

“A lot of progress has been achieved in the last year when it comes to tech adoption, but the industry needs to be ambitious and continue to build upon this momentum to provide better outcomes for its consumers.”

By Jake Carter

Source: Mortgage Introducer

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Value of new mortgage commitments reach highest level since 2007

The value of new mortgage commitments was up 24.2% annually to reach £87.7bn, and is at the highest level since 2007 according to the Financial Conduct Authority (FCA).

The quarterly mortgage lending statistics data also shows that the outstanding value of all residential mortgage loans was £1,541.4bn at the end of Q4 2020, 2.9% higher than a year earlier.

The value of gross mortgage advances in Q4 2020 was £76.6bn, 4.2% higher than in Q4 2019.

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Since the beginning of 2007, am estimated 340 regulated mortgage lenders and administrators have been required to submit a Mortgage Lending and Administration Return (MLAR) each quarter, providing data on their mortgage lending activities.

The FCA and the Prudential Regulatory Authority (PRA) both have responsibility for the regulation of mortgage lenders and administrators so this data publication is joint.

Jonathan Stinton, head of intermediary relationships at Coventry Building Society, said: “The highest volume of mortgage commitments since 2007 has been fuelled by the stamp duty holiday.

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“It not only means that brokers will have a very healthy pipeline of business throughout the start of this year but also there is plenty of momentum in the market.

“The stamp duty holiday extension until the end of June should help to maintain high volumes but brokers need to be mindful of the time it takes for offers to complete. New buyers or movers need to have contingency plans in case they miss the June deadline and are faced with a tax bill.

“The huge numbers in Q4 have been fuelled mainly by movers and first time buyers but there is still a large market out there for remortgage business.”

By Jake Carter

Source: Mortgage Introducer

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New mortgage guarantee scheme set to be announced in Budget

A mortgage guarantee scheme to help prospective homeowners with smaller deposits onto the property ladder is set to be announced in the Budget on Wednesday 3 March.

The government will offer incentives to lenders in order to bring back 95% LTV mortgages which were removed from the market as a result of the pandemic.

According to The BBC, the scheme will involve the government offering to take on some of the risk that comes with low-deposit mortgages in order to bring them back onto the market.

The new scheme will reportedly not be limited to first-time buyers but there will be a maximum property limit of £600,000, and will be offered from April.

No end date for the scheme as been confirmed.

The scheme is based on the Help to Buy mortgage guarantee scheme which ran until December 2016.

Mark Harris, chief executive of SPF Private Clients, reacted to the news: “Turning ‘Generation Rent’ into ‘Generation Buy’ has been a focus for Boris Johnson for a while so the return of 95% LTV mortgages for first-time buyers doesn’t come as a complete surprise.

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“This, coupled with the extension of the stamp duty holiday, will result in a Budget which is a real boost for buyers.

“It is positive news for first-time buyers, particularly as it is not restricted to new homes, although critics may argue that it will only aid house price inflation.

“But without such a scheme would developers be so keen to put spades in the ground?

“The supply of new housing is nowhere near where it needs to be to satisfy demand.

“For those with little in the way of deposit, finding a 95% LTV mortgage has been pretty much impossible in recent months.

“The odd building society here and there has offered them, with Saffron building society launching at 95% LTV in June but it only lasted a matter of days.

“Furness BS also has a selection of 95% products but these are restricted to certain postcodes.

’The only other current option to obtain a mortgage at this level is to call upon a third party, typically a parent, to provide extra security in the way of deposits or equity within the ‘guarantor’ property.

“Not everyone is in a fortunate position to do so.

“The last time there was a mortgage guarantee treasury scheme was via Help to Buy.

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

“The mortgage guarantee offering closed to new loans on 31 December 2016 (the equity loan continues, albeit in a revised form today) but by then, many of the high-street names had removed themselves from the scheme and ‘self-insuring’ their 95% offerings.”

Rightmove put together the latest figures on asking prices and how many properties could be eligible under the scheme.

Their data found that 86% of properties up for sale have an asking price of £600,000 or less, with the national average asking price for all properties standing at £318,580, a 3.0% increase from February 2020.

The national average asking price of a first-time buyer property is £200,692, which is 3.6% higher than February 2020.

Since the Help to Buy mortgage guarantee scheme was first launched in 2013, national asking prices have increased by 29% from £246,748 in October 2013 to £318,580 in February 2021.

Mark Hayward, chief policy adviser at Propertymark, added: “A government backed mortgage guarantee scheme will help first-time buyers get on the housing ladder at a time when for many owning a home seems an impossible dream.

“Alongside the potential extension of the stamp duty holiday that we have been calling for, this new scheme will go some way in giving some hope to first-time buyers at a time when the size of deposits required means they fall at the first hurdle.”

By Jessica Nangle

Source: Mortgage Introducer

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Lenders return in week after lockdown

Lenders have reintroduced physical valuations and higher loan-to-value lending after the government gave the green light to restart the housing market in England last week after seven weeks of lockdown.

Accord Mortgages announced today (May 20) that it is accepting residential applications up to 90 per cent LTV following the renewal of physical valuations.

Buy-to-let remortgages are currently available up to 65 per cent LTV, although a spokesperson for Accord said an announcement on this was due on Friday.

Meanwhile, Virgin Money and Clydesdale Bank confirmed “a wider range of products supported with a mix of physical and non-physical valuations” would be introduced next week, including residential mortgages up to 90 per cent LTV and buy-to-let mortgages up to 80 per cent LTV.

Temporary limits on loan sizes and property values will also be withdrawn.

Additionally, physical valuations will be booked in England for pipelines cases with Virgin Money and Clydesdale Bank that require such a valuation.

Some lenders had already resumed offering high LTVs last month. Halifax Intermediaries reintroduced lending up to 85 per cent LTV in April, followed by BM Solutions’ return to buy-to-let lending up to 75 per cent.

Nationwide also extended lending via brokers up to 85 per cent LTV after focussing support on existing borrowers and processing ongoing applications.

Providers had previously withdrawn high LTV lending after the government announced a lockdown on March 23, which effectively brought the property market to a halt.

Additionally, Nationwide has confirmed that valuers will be able to resume physical inspections this week (from May 18) after the government published its new guidance on moving home.

Likewise, Santander announced the following day (May 19) its valuation partners would aim to contact intermediaries’ clients, or the property owner, by May 29 to arrange a date for cases in England that required a physical inspection and had been put on hold.

It anticipated that most valuations will be carried out before June 10.

Santander said it would be holding rates while increasing the maximum loan size to £1m on some residential products, and to £750,000 on its buy-to-let range.

This followed recent changes from Santander such as raising the maximum LTV for residential lending to 85 per cent, and for buy-to-let remortgage products to 60 per cent LTV.

Meanwhile Leeds Building Society is working with Countrywide to complete the “outstanding minority” of valuations on mortgage applications as physical inspections resume in England.

Jaedon Green, chief customer officer at Leeds Building Society, said desktop valuations will continue to be used where appropriate and “for homeowners particularly concerned about social distancing, we’re also piloting external inspections which mean a valuer will still visit their home but doesn’t need to enter it”.

Specialist lenders have also been adapting to market conditions. As well as resuming physical valuations, on May 19 West One Loans relaunched buy-to-let products at 70 per cent LTV, subject to a maximum loan size of £250,000.

For many brokers the renewal of physical valuations is likely to be welcome news.

Andrew Brown, managing director at Bennison Brown, said the main challenge during lockdown was that an estimated 60 per cent of their cases were not suitable for remote valuation.

Commenting on the return of physical valuations and viewings, Mr Brown said: “It is likely to take some time to clear the backlogs and for consumers to gain confidence but it is the first major piece of good news we’ve had for some time.

“We hope this is the start of the recovery of our sector.”

Some advisers had pointed to issues with undervaluations as remote valuations were carried out during lockdown.

Kevin Dunn, director at Furnley House, said some of his remortgage clients, who had properties valued remotely, felt they would have received a higher figure if a physical valuation had been carried out.

By Chloe Cheung

Source: FT Adviser

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Payment holiday is top search term in residential mortgages

The COVID-19 mortgage payment holidays introduced by Chancellor Rishi Sunak took top spot during March 2020 as the most searched for term among brokers within the context of residential mortgages, according to lending database Knowledge Bank.

Beyond the payment holiday, residential mortgage search terms continued as normal in March, with ‘maximum age at end of term’, ‘interest only’ and ‘self employed – one years accounts’ making up the rest of the top four.

Fifth on the list is ‘defaults – registered in the last three years’, which Knowledge Bank reports is likely to rise in the coming months.

For the buy-to-let market, ‘COVID-19 mortgage payment holidays’ was second on the list, but ‘lending to limited companies’ remained top for the third month running.

For second charges, brokers were most likely to search for the maximum loan-to-value ratio (LTV) or minimum loan amount, the latter arguably showing the increasing need to release cash during the current crisis.

The rest of the top five search terms related to second charges were ‘mortgage or secured loan arrears or defaults’, ‘debt management plan – ongoing/current’ and ‘internal/automated valuation model (AVM)/desktop valuations’.

The last option is a new entry, but one that is expected to appear across all categories as the lockdown continues to interrupt in-person valuations.

In the equity release market, the top five search terms were ‘early repayment charges’, ‘partial repayments’, ‘property with an annex/outbuilding/land/acreage’, ‘tenants in common acceptable’ and ‘second home/property’.

Fluctuations in this category are likely the result of fewer brokers searching for equity release.

Searches relating to bridging loans and commercial lending were not particularly disrupted; the top search terms here were ‘regulated bridging’ and ‘semi-commercial properties’, respectively, and both categories had ‘maximum LTV’ in second place.

However, these categories are expected to change significantly over the coming month, as many in these sectors are now unable to lend.

In addition to monitoring the most popular search terms, Knowledge Bank has established a ‘COVID-19 criteria live feed’.

This registered almost 500 changes to criteria among 14 lenders within just 48 hours last week.

Nicola Firth, founder and CEO at Knowledge Bank, said: “With the number of lender criteria changes increasing by the day there has never been a more important time to have subscription to a criteria search engine.

“As the UK’s largest and most comprehensive mortgage criteria search system, the industry looks to us to provide up-to-date and accurate information on lending policy.

“At this time of change it is important to reflect the issues and the searches that brokers are carrying out as it reflects on the market as a whole.

“The number of broker registrations and searches has increased exponentially over the past three weeks and the a peek into those searches provides us with a fascinating insight.

“April will clearly be even more revealing as the broker searches could change more dramatically than anything we have seen to date.”

By Jessica Bird

Source: Mortgage Introducer

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BoE: Outstanding value of residential mortgage loans up 3.8%

The outstanding value of all residential mortgage loans was £1.499bn at the end of 2019, which is a year-on-year increase of 3.8% according to the latest Bank of England Mortgage Lenders and Administrators Statistics.

The value of gross mortgage advances was £73.4bn which remains broadly unchanged in comparison to Q4 2018.

New mortgage commitments, or lending agreed to be advanced in the coming months, was 4% higher than in 2018 at £70.6bn.

The share of mortgages advanced in Q4 2019 with LTV ratios exceeding 90% reached 5.7%, which is a rise on figures recorded the year previously.

The share of gross mortgage lending for buy-to-let purposes was 12.4%.

The value of outstanding balances with ‘some’ arrears fell by 2.1% over the quarter to £13.4bn, and now accounts for 0.89% of outstanding mortgage balances.

Mark Pilling, corporate sales managing director at Spicerhaart, said: “The Q4 arrears figures from the Bank of England are broadly positive, showing another fall on the back of previous quarters.

“There was also a small drop in high LTV mortgages and high loan-to-income ratios – although single-income borrowers with an LTI ratio above four actually rose slightly, which could be a cause for concern.

“With the coronavirus Covid-19 already beginning to cause real disruption to businesses and people’s livelihoods, it remains important that lenders have a flexible attitude and continue to seek outcomes that are right for customers.

“There is a strong likelihood that arrears will rise as a result of the virus, and the measures imposed to slow down its spread.

“Lenders need to be ready for a situation where people are facing real financial difficulties through no fault of their own.”

By Jessica Nangle

Source: Mortgage Introducer

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UK property market: Mortgage approvals dip from 26-month April high

The number of residential mortgages approved by banks dipped last month, easing back from a 26-month high in April but remaining above the monthly average.

Seasonally adjusted figures show that banks in Britain approved 42,384 house purchase mortgages in May, falling from roughly 42,900 in April but beating the consensus of 41,000.

The actual number of mortgages for home purchase approved by the main high street banks in May 2019 was also 9.1 per cent higher than in the same month in 2018, marking the highest annual level since June 2016.

According to UK Finance, which released the figures this morning, gross mortgage lending across the residential market in May 2019 was £21.9bn, falling 0.4 per cent compared with the same month in 2018.

“May’s mortgage approvals data support the view that housing market activity may well have got at least some temporary support from the avoidance of a disruptive Brexit at the end of March. It may very well also be that the housing market has benefited from recent improved consumer purchasing power and robust employment growth,” said Howard Archer, chief economic advisor at the EY ITEM Club.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “The increase in mortgages for home purchase, rising to the highest level in three years, is hugely encouraging when you consider the political uncertainty which is causing many people to put decisions to move on hold.”

He added: “It suggests a much more resilient market than one might expect, and once a decision is made over Brexit, one way or another, we are likely to see a further uptick in transactions as pent-up demand is released.”

By Sebastian McCarthy

Source: City AM

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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