Tag Archives: industry
Research shows interest only mortgage numbers in UK are falling
Concerns have been growing in the UK over the number of home owners with interest only mortgages who do not have enough finance to cover themselves when their loan comes to an end. But new research shows that over the past two years the total number of interest only loans outstanding has fallen by over a quarter with a 16% reduction in the number of loans over the past year alone. According to the Council of Mortgage Lenders the progress that has been made and the ongoing steps that are being taken by the industry to check that borrowers with interest only mortgages have plans for how they will repay their loans at maturity is encouraging. As at the end of 2014, CML members reported that there were around 1.9 million pure interest only mortgages outstanding, and around 460,000 part interest only mortgages. This was around 300,000 fewer pure interest only mortgages and 160,000 part interest only mortgages than a year earlier. The CML research suggests that a quarter of this reduction is down to natural attrition, which is loans maturing and repaying at the end of their term. Around a third can be attributed to full redemption of loans not set to mature until at least 2028, suggesting that many borrowers are taking action well before problems could arise. This also suggests that a significant group of borrowers are successfully remortgaging onto full repayment terms without falling foul of new affordability rules. Of those loans that have matured, few have failed to repay. In total, there are fewer than 16,000 loans outstanding which have matured but not yet repaid or restructured and previous experience shows that most such loans subsequently redeem within a relatively few months of maturity. However, the CML said there is no room for complacency and members are continuing to think about the options for customers who may not be able to repay their mortgages. This includes more partnering with third party advice providers, including equity release firms, and product innovations that may help some borrowers. The CML also pointed out that it remains a challenge to get borrowers to respond to lender contact designed to help them plan for their mortgage's repayment at maturity. Lenders contacted around 427,000 interest only customers between April and December 2014, about 17% of all interest only borrowers. During 2014, the focus of lender communications moved beyond those whose mortgages are due to mature by 2020, and included borrowers whose mortgages are not due to mature until after this. Response rates by borrowers varied. Around 27% of those contacted whose mortgages are due to mature between 2021 and 2028 responded but only a disappointing 2% of those whose mortgages are not due to mature until after 2028 did. However, where lenders did succeed in getting customers to respond, 86% of those who responded had a repayment strategy, and those who did not appeared responsive to making changes such as switching to repayment terms,… Continue reading
UK lenders and brokers concerned about new European mortgage directive
Almost three quarters of mortgage brokers in the UK, some 74%, are worried about the impact of the incoming European Mortgage Credit Directive (MCD) on overall lending activity over the next year. A similar number of lenders, 71%, take the same view as MCD implementation approaches, with a six month window from 21st September to 21st March to adopt the new rules, according to new research from the Intermediary Mortgage Lenders Association (IMLA). Unlike last year’s Mortgage Market Review (MMR), many of the MCD changes are of a technical nature involving new approaches to disclosure and documentation rather than major changes to advice, affordability criteria or lending decisions for residential mortgage borrowers. Nevertheless, 40% of brokers believe a smooth implementation of the MCD will be more challenging for the industry as a whole than MMR, including 11% who believe it will be significantly more challenging. The majority of lenders, 71%, believe it will be at least as challenging for industry to implement MCD and this includes 21% who believe it is more of a challenge, although 28% feel it will be less challenging. The UK government has openly questioned the benefits of MCD to UK consumers beyond the high level of protection offered by the existing FCA regime, and its approach to the negotiation and implementation of the MCD has been to minimise the impact on the UK market as far as possible. And the IMLA research also shows industry remains sceptical about a number of incoming changes in the lead up to implementing the MCD. Just 5% of brokers felt the introduction of a second APR will benefit the UK mortgage market, while 70% disagreed, as did 86% of lenders. Similarly, just 9% of brokers feel that replacing the Key Facts Illustration document (KFI) with the European Standard Information Sheet (ESIS) is a beneficial move while 68% disagree. Lenders were again stronger in their opposition with 86% disagreeing that the switch from KFI to ESIS will benefit the market. The research also shows that broker sentiment about market conditions at the midway point of 2015 was broadly consistent with the start of the year, with 50% feeling conditions are improving, compared with 51% in January. This is slightly improved from July 2014 when 46% felt the same. The report notes that 67% of lenders feel conditions are currently improving, up from 53% at the turn of the year and just 44% last summer. IMLA’s research suggests ‘standard’ borrowers and first time buyers have both benefitted from improving access to mortgage finance as the market has adjusted to the MMR requirements. During the first half of 2014 some 34% of brokers had been unable to find a suitable product for at least one standard borrower, but just 25% have reported the same in the first half of 2015. Similarly, 28% had been unable to help at least one first time buyer enquiry in the first six months of last year, but just 20% had this… Continue reading
Construction up across the UK, led by homes and office developments
Construction workloads rose across all sectors and in each part of the UK in the second quarter of 2015 according to the latest market survey from the Royal Institution of Chartered Surveyors (RICS). Some 44% more surveyors reported higher activity levels, up from 37% on the previous quarter, driven by office development and private house building. The pace of growth in Northern Ireland was slowest and at a headline level, 74% more respondents expect to see their workloads rise and respondents forecast growth of 3.8%. Over half, 51% net balance, of respondents reported higher workloads in private housing and 58% in the private commercial sector, following a 22% rise in new orders in the first quarter of the year. Activity in London and the South East appears stronger than elsewhere in the UK, so profit margins and employment expectations are higher in these parts of the UK than anywhere else with 62% more respondents expecting to take on more people over the next 12 months and 58% expecting higher profits. Financial constraints and issues with planning and regulation remain the key restraints on growth in the sector with 58% more surveyors reporting difficulties in the second quarter. In addition, 40% of respondents reported shortages of materials, but this is an improvement on the 60% who were having such difficulties through most of 2014. ‘The upturn in workloads has led to a less competitive tendering environment, particularly across public sector projects, but a lack of accessible finance is now affecting a net balance of 58% of our members and while concern over labour shortages dipped slightly, the demand for cost and project management skills rose,’ said RICS director of the built environment, Alan Muse. ‘Also typical as workloads recover is the emergence of other impediments to growth, outside of labour and finance constraints, such as planning and regulatory barriers, which could be exacerbated if cuts are made to local authority planning departments as backlogs in planning applications will have a knock-on effect to work pipelines,’ he added. Meanwhile, the latest state of the trade survey from the Federation of Master Builders (FMB) says that in the second quarter of the year it is skills shortages that are undermining activity in the small to medium construction sector despite the fact that the building industry has been booming for more than two years. ‘There can be no doubt that the building industry is booming but the skills shortage continues to loom large over our industry. Almost half of construction SMEs are struggling to recruit adequate numbers of bricklayers, with others finding it increasingly hard to hire carpenters and joiners, site managers and supervisors,’ said Brian Berry, chief executive of the FMB. ‘Looking ahead, our members are reporting that their workloads are likely to rise over the coming three months which means the shortage of skilled workers will only become more acute. It also begs the question, how much stronger would the pace of growth in… Continue reading
