Property News

Mortgage market news

In this article, we round up the latest UK mortgage market news.

Market remains buoyant​

The Council of Mortgage Lenders (CML) issued its latest report in March. Its headline finding was that there was some £18.9 billion worth of mortgage lending in January 2017. This figure was up two per cent from the same month in 2016 and actually represented the healthiest January since just before the onset of the global financial crisis in 2008. The CML sounded a note of caution, however, saying that mortgage lending in January was six per cent lower than in December, when banks and other lenders approved £20 billion worth of home loans.

There were around 68,000 mortgage approvals for house purchases in the last quarter of 2016. The CML said that this was slightly lower than the same period in 2015, when 70,000 loans were approved, but added that it was still significantly better than the rather sluggish activity recorded in the summer quarter, when just 61,000 home loans were approved. Overall, said the CLM, it expects that about 71,000 mortgages will be approved in each of the first three quarters of 2017.

Two speed market

Discussing his organisation's report, Mohammad Jamei, a senior economist, said that the latest statistics conceal a two speed mortgage market. While approvals for first time buyers and remortgage activity have been robust, lending to home movers and buy-to-let landlords has largely stagnated. Regular readers of Nethouseprices columns will recall from previous pieces that the double whammy of a new tax regime for landlords and tougher prudential rules around buy-to-let lending was predicted to have an impact on mortgages within the sector. The CML report is just one of a series of studies showing that the forecast was not misplaced. In January this year, £800 million was borrowed by landlords, a striking decline from the same month last year, when they borrowed £1.4 billion. The figure was also down from December, when buy-to-let borrowing reached £900 million. The question of course arises, as to whether this slowdown is the result of volatility in house prices in the UK. In other words, are landlords borrowing in the same numbers, but borrowing less? The clear answer is "no" - 5900 individuals​ obtained buy-to-let mortgages in January, comparing with 9700 last January and 29,100 in March 2016.

The CML added that the uptick in first time buyers obtaining mortgages should surprise no one. The raft of Help-to-Buy measures introduced by central government is having its desired effect of easing this group onto the housing ladder.

The widely discussed White Paper on Housing, published a month ago by Sajid Javid, Minister for Communities and Local Government, is also mentioned by the CML. The body is sceptical about whether the contents of the White Paper will make a great deal of difference, at least in the short term. The policies, contends the CML, will, assuming they are all implement​ed, take time to make an impact on the supply of houses, house prices in the UK and the rental market.

Locking into a low interest rate mortgage: a good idea?

There has been a debate in recent weeks about whether now is the optimum time to lock into a low interest rate mortgage. The Daily Telegraph, for example, produced a list of reasons for which its contributor believed it was an excellent idea for those who are in a position to lock into such a mortgage, to do so. What are the reasons?

1. Inflation is expected to reach 2.9 per cent by the end of this year, principally owing to the comparative weakness of sterling. Clearly, this will damage household finances, which are unlikely to be boosted by significant wage growth during the balance of 2017. Locking into a low interest rate mortgage could be a way to help manage family finances. Equally, economists are suggesting that the Monetary Policy Committee (MPC) of the Bank of England will feel compelled to attempt to counter inflation by raising interest rates. There have, of course, been several occasions during the past few years where experts have forecast a rise in interest rates and, to date, it hasn't happened. It's easy, therefore, to dismiss this warning too. That said, rates will not stay this low forever and the inflation issue might just force the MPC's hand.

2. The Telegraph points out that two year fixed interest rates are already creeping up. In November, the average two year fixed rate was 1.31 per cent. By the end of February this year, it had reached 1.35 per cent. Interbank lending - the process by which banks borrow money to lend out on mortgages - is also becoming dramatically more expensive. This is traditionally a reliable barometer of the direction mortgage interest rates will take.

3. Britain faces an extended period of uncertainty. We don't, for instance, know the shape Brexit negotiations will take. Certainly, most economists are expecting the economy to cool down and, with it, the jobs market and wage growth. The Telegraph argues that, by locking into a fixed rate mortgage, a household can at least guarantee itself some degree of financial certainty.

4. The article suggested that the provisions in Philip Hammond's Spring Budget affecting the self-employed might make it harder and more expensive for this group to obtain mortgages, because lenders would have to factor in the increases in taxation when applying their affordability criteria to mortgage applications. This argument has rather been overtaken by events, with Mr Hammond announcing that he was withdrawing the proposal to hike National Insurance payments for the self-employed. That said, lending rules are likely to become more rigorous if the economy does start to slow down, so now is probably as good a time as there will be to lock into a fixed rate mortgage.

Nethouseprices urges readers to take expert advice before committing to any mortgage product, because what is right for some isn't necessarily what's best for you and your family.

Visit us again soon for more news, commentary and analysis of the UK property market.
 

Source: Nethouseprices

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