Tag Archives: lending
London property market avoids usual seasonal lending dip
The usual seasonal dip in home lending in the first quarter of the year didn’t seem to happen in London as the latest data shows borrowing up quarter on quarter and year on year. The data from the Council of Mortgage Lenders shows that home buyers in London borrowed £7.1 billion in the first three months of 2016, up 6% quarter on quarter and 41% on a year ago. They took out 21,400 loans, down 2% on the previous quarter but up 20% compared to the first quarter 2015. First time buyers borrowed £2.9 billion, down 7% on the fourth quarter 2015 but up 19% on the first quarter last year. This equated 10,700 loans, down 10% quarter on quarter but up 3% year on year. Home movers borrowed £4.2 billion, up 18% quarter on quarter and 63% compared to a year ago. This equated to 10,600 loans, up 8% quarter on quarter and 43% compared to the first quarter of 2015. Remortgage activity totalled £4 billion, up 4% on the fourth quarter 2015 and 36% compared to a year ago. This came to 13,500 loans, up 2% quarter on quarter and 21% compared to a year ago. ‘The usual seasonal dip in lending in the first quarter of the year didn't seem to impact London as strongly as the UK overall, mainly due to a strong uptick in home mover activity. Remortgage lending also performed well resulting in the highest first quarter remortgage levels in the capital since 2009,’ said Paul Smee, director general of the CML. ‘The housing market in Greater London has some unique characteristics compared to the rest of the UK such as more first time buyers, but lower overall levels of home ownership,’ he pointed out. ‘Affordability and the supply of housing remain critical factors for the London market, and we will be pleased to work with the new mayor and his deputy on how to deliver appropriate strategy over his term of office,’ he added. The data also shows that quarter on quarter affordability metrics for first time buyers show that the amount borrowed increased to £248,047 compared to the UK average of £130,500, from £243,746, but this was offset by a rise in the total household income of borrowers to £62,508 compared to the UK average of £40,000, from £61,155 meaning the median income multiple remained virtually unchanged from 3.94 to 3.93. London home movers saw a similar trend to £338,500 to the UK average of £172,295, from £315,995 the previous quarter, and household income increased to £91,862 on average compared to £56,104 UK-wide, from £84,313 meaning the income multiple decreased slightly from 3.87 to 3.83. The proportion of monthly gross income home buyers are spending on capital and interest repayments was 19.0%, which was the lowest level since the CML began tracking this metric in 2005. The number of remortgage loans was the highest first quarter figure since 2009, and the highest value… Continue reading
Lenders in UK praised for work on responsible lending requirements
Lenders in the UK positively applied the responsible lending requirements which came into force as part of the Mortgage Market Review (MMR) introduced in April 2014, a new report concludes. But there is scope for improving consumers’ ability to make better choices about mortgage deals according to the Responsible Lending Review published by the UK’s financial watchdog, the Financial Conduct Authority (FCA). It also says that some firms need to make process improvements to help them consistently assess and record their lending decisions and some could be more proactive and consistent in making use of flexibilities and exceptions to the responsible lending requirements for existing customers. The research found no evidence that the rules have prevented firms lending responsibly to consumer groups such as older borrowers and the self-employed. However it points out that with older consumers representing an increasing proportion of the UK population it is important that the mortgage market continues to develop a range of products that can meet their needs. Potential issues relating to lending to older borrowers will be included in wider work on the ageing population being undertaken by the FCA. The review looked at the challenges that consumers face in making effective choices, particularly when it comes to assessing and acting on information about mortgage products, with intermediaries being key to the process. It also examined if there are opportunities to make more effective use of technology in the provision of information and advice and commercial relationships between different players in the sector’s supply chain, in particular the use of panels, that might give rise to competition concerns. The FCA will carry out further work where there is greatest scope for competition to improve consumer outcomes. In particular, it will launch a targeted market study in the fourth quarter of 2016 focused on consumers’ ability to make effective choices, with a view to improving how competition works in consumers’ best interests. This study will try to determine if the available tools for helping consumers make choices, such as price comparison websites, best-buy tables, and advice, effectively meet their needs. ‘For millions of consumers a mortgage is one of the biggest financial transactions they will enter into in their lifetime so it’s encouraging to see firms embrace the spirit and the letter of our rules,’ said Christopher Woolard, director of strategy and competition at the FCA. ‘At the same time, there appears to be more to be done to improve competition in the mortgage sector. Competition can play a key role in ensuring that the sector works well, delivering lower prices, better products and choice, and more innovation,’ he explained. ‘Based on the evidence we’ve collected so far, we intend to launch a forward looking market study later on this year, with particular focus on the roles played by intermediaries and panels,’ he added. The Council of Mortgage Lenders welcomed the review and pointed out that members are already working on certain areas such as improving consumers' ability… Continue reading
March saw unprecedented lending levels in UK due to buy to let rush
Home owner house purchase lending was up by 60% year on year in the UK in March but the overall lending figures were affected by a rush from buy to let buyers seeking to beat a new stamp duty surcharge. Overall on an unadjusted basis, home owners borrowed £13.8 billion and first time buyers borrowed £4.5 billion, up 32% on February and 29% on March last year, according to the latest figures from the Council of Mortgage Lenders. Home movers borrowed £9.3 billion, up 75% on February and 82% compared to a year ago while remortgage activity totalled £4.7 billion, down 2% on February but up 7% compared to a year ago. Landlords borrowed £7.1 billion, up 87% month on month and 163% year on year but CML director general Paul Smee pointed out that activity was distorted in March due to a rush to beat the introduction of changes to stamp duty on second properties in April, alongside the seasonal uptick in activity before Easter. ‘While the increases are substantial, these supercharged levels of activity are likely to be temporary and will fall back over the summer months,’ he added. Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA), suggested that while activity has picked up among home movers, the leap in landlord lending makes it clear that price inflation has been fuelled by the Government’s stamp duty changes for buy to let properties and second homes, incentivising many buyers to bring their purchases forward where possible. ‘A policy move that aims to manage long term demand has therefore created short term tremors in the market and made it hard to predict how things will look when the dust settles. The Government’s hope is that first time buyers will find their prospects improved and lenders are certainly doing their bit with first time buyer lending up 29% year on year,’ he explained. ‘Continuing access to high loan to value (LTV) mortgages is an important part of this equation, and should not be frowned upon given the rigorous affordability checks in place,’ he pointed out. ‘Nevertheless, the UK needs a balanced housing market to prosper and playing politics across tenures cannot compensate for the underlying short supply of property. Added uncertainty from the upcoming EU referendum vote means the market is in urgent need of time and space to draw breath. Now is not the time to consider further tinkering under the bonnet after a rollercoaster start to the year,’ he added. According to David Whittaker, managing director of Mortgages for Business, it wasn’t just March which was exceptional. ‘The first quarter as a whole was strong as landlords reacted to tax changes. The dust will begin to settle in this part of the mortgage market through the second quarter of the year,’ he said. ‘Landlords have a new status quo and it’s not just the additional stamp duty that needs to be factored into… Continue reading
