Tag Archives: banking
Mortgage approvals end 2015 on a strong footing, bank data shows
Approvals for home purchases in the UK increased towards the end of 2015 with December being a strong month, according to the latest figures from the Bank of England. The number of loan approvals for buying in December was 70,837 compared to an average of 69,462 over the previous six months while the number of approvals for remortgaging was 41,708, compared to the average of 39,540 over the previous six months But the next few months are likely to be very different, according to David Whittaker, managing director of Mortgages for Business. ‘The next wave of activity will be powered by landlords scrambling to complete transactions before they are hit with extra taxes. This is only just beginning,’ he said. ‘With 01 April marking the point at which Stamp Duty on buy to let properties bites, many investors have been rushing to get their mortgages completed and expand their portfolios before this date,’ he pointed out. ‘Expect this flurry of activity to continue into the first few months of 2016, as investors rush to apply for their buy to let mortgages and lenders do everything in their power to get the good applications completed before the April crunch point,’ he added. Peter Williams, executive director of Intermediary Mortgage Lenders Association, pointed out that December was the busiest month for remortgaging in over two years, with activity growing more than twice as fast as overall approvals. ‘The continued appetite for remortgaging was likely to be a sign of home owners eager to capitalise on market competition and lock into lower rates, especially with US raising interest rates for the time in nine years and expectations the UK would follow suit in the not too distant future,’ he explained. After the Autumn Statement extensions to Help to Buy, and the rock bottom base rate lasting out the year, first time buyers were feeling decisive, and this was mirrored by a clear upswing in house purchase approvals from November to December, according to Peter Rollings, chief executive officer of Marsh & Parsons. ‘This energy has definitely been carried over into 2016, and January has already seen an impressive influx of motivated buyers, eager to progress up the property ladder,’ he explained, adding that 2015 was also the year of remortgaging for many existing home owners and this momentum is showing no signs of dissipating while cheaper fixed rate mortgages remain available. ‘But in the coming months we can expect strong buy to let lending, as the April introduction of higher stamp duty for second homes gives a new sense of urgency for those looking to invest in property or expand their existing portfolio,’ he added. Continue reading
Irish property prices continue to see sustained growth
Property prices in Ireland increased nationwide by 2.3% in August and are up 9.5% compared to a year ago, the latest official data shows. In Dublin property prices rose by 2.8% in August and were 8.2% higher than in August 2014. A breakdown shows that house prices are rising faster than apartments at 3% and 0.3% respectively. However, the index report from the Central Statistics Office says that it should be noted that the sub-indices for apartments are based on low volumes of observed transactions and consequently suffer from greater volatility than other series. In the rest of Ireland, excluding Dublin, prices rose by 1.9% in August and were up 10.8% compared with August 2014. This means that at a national level residential property prices were 35.4% lower than their peak level in 2007 and excluding Dublin residential prices were 38.7% lower than their highest level in 2007. In Dublin house prices were 34.4% lower than the peak, apartment prices 40.4% lower and Dublin residential property prices overall 36.2% lower than their highest level. However, there are concerns that house prices are growing too fast. The Irish economy grew by a Eurozone record of 7.2% in the second quarter and according to the Organisation for Economic Development and Coordination (OECD) is set to grow by 5% overall in 2015 and 4% in 2016. But the OECD is concerned that rapidly rising house prices still pose one of the biggest risks to financial stability and an uncontrolled property boom would ‘increase vulnerabilities, especially if it were associated with further indebtedness’. Its latest review says that such strong price rises may again spark a reinforcing spiral of higher property prices and credit leading to another misalignment of property prices and eventual burst that causes large losses in the banking sector. ‘To avoid repeating past mistakes, now is the time to build resilience against future nasty surprises while ensuring the recovery is sustained, and its benefits broadly shared,’ said Angel Gurría, secretary general of the OECD. The OECD suggested that the Irish government should take measures to cool the market, such as avoiding subsiding first time buyers and encouraging growth in the rental market. Continue reading
Warning over too much mortgage regulation in the UK
Regulators’ determination to reform the UK mortgage market has resulted in a layering effect which threatens to stifle consumer access to credit if it goes unchecked, according to a new report. The cumulative impact of new MMR financial regulations introduced last year and the implementation of the European Union Mortgage Credit Directive, is affecting the lending recovery, says the Intermediary Mortgage Lenders Association (IMLA). The report acknowledges and accepts the need and ‘inevitable’ cost of improving the safety of the banking sector and preventing a repeat of the financial crisis but it warns that the common objective of building a ‘sustainable’ market with enough room to deliver positive outcomes for consumers is threatened by the sheer volume of new rules. It also points out that the overlapping effect may unwittingly tip the balance too far away from consumer choice and it is calling on the Bank of England to establish a in industry panel to guard against too many rules. The report raises concerns over regulators’ potential ‘bias to action’ where they perceive a high cost to their reputation if they are seen to be too permissive, compared with a low risk of being too restrictive. IMLA cites the Financial Policy Committee (FPC) decision in June 2014 to impose interest rate stress tests and limit high loan to income (LTI) mortgage lending as an example of this bias. The actions came at a time when the effect of the MMR on the market was still unclear, and saw the fledgling recovery of 2014 followed by a subsequent downturn in mortgage activity that brought eight successive months of approvals falling year on year. Despite the slowdown, the FPC was given further powers in February 2015 to cap loan to value and debt to income levels for mortgages. These powers are as-yet unused but the IMLA suggests these actions support the view that regulators perceive a ‘normal’ mortgage market to be significantly smaller than that which existed before 2007, which has implications for access to home ownership as the UK population grows. To prevent regulatory layering from choking off the recovery, IMLA calls on the Bank of England to maintain an ongoing review of the new regulatory framework to identify unnecessary overlap and costs. One solution it proposes is a joint Bank of England industry panel that specifically focuses on identifying areas where regulations are unnecessarily complex or duplicative. ‘No-one is questioning the need for continued caution or the regulators’ responsibilities to put boundaries in place to ensure the mortgage market is sustainable in the long term,’ said Peter Williams, executive director for IMLA. ‘You could also argue that regulators and industry will naturally have differing views about what constitutes normal or healthy activity and this is exactly why it’s in consumers’ interests to put a permanent forum in place where the two can put the vast tomes of new regulation under the microscope,’ he pointed out. ‘We must ensure that future regulatory… Continue reading
