Tag Archives: lending
Over a year on from new UK mortgage rules, many are still unaware of the change
Two thirds of potential house buyers in the UK been left in the dark about the new mortgage rules which were introduced last year, new research has found. The survey by mortgage lender and broker Ocean Finance shows that some 31% of people who plan to buy a property within the next two years are unaware that mortgage rules were overhauled more than a year ago. A further 35% of potential buyers did know that mortgage regulations had changed, but said they felt confused by the new rules. In April 2014, the biggest piece of mortgage regulation in a decade came into force. The changes, brought in by the Financial Conduct Authority, mean lenders must take additional steps to ensure borrowers only get a mortgage they can afford. In practice, the new mortgage rules mean that borrowers will face increased scrutiny from lenders about their incomes and their expenditure including spending on things such as childcare, holidays and entertainment. Yet 70% of those questioned were unaware that lenders are required to look closely at their spending. Consequently, a quarter said they haven’t changed their spending habits to help them qualify for a mortgage. Of those who do know that lenders are required to examine spending, more than a fifth have reduced their spending on treats and have stopped contributing to life assurance and pensions to keep a greater proportion of their income in their bank accounts. Just 24% of aspiring home buyers questioned were aware that the new rules also test their ability to afford a mortgage if interest rates rise. And even fewer people, 16%, knew that the rules would also test their ability to withstand changes to their personal circumstances. To help demystify the new rules and ensure they are prepared to apply for a mortgage, almost a fifth of potential buyers have sought advice from an independent mortgage broker. Almost 30% have looked online for information about the rules and 14% have relied on their friends or family for advice. Worryingly, a third have not sought any advice on applying for a mortgage. The research shows that a third of potential home buyers are so concerned about the tougher mortgage rules that they expect to have to delay buying a house so they can save for a bigger deposit and get into a stronger position to obtain a mortgage. ‘More than a year after the new mortgage rules were introduced, potential buyers are still in a state of confusion about what they mean in reality. Even more worrying is that a large chunk of people who are gearing up to apply for a home loan are not even aware that the mortgage rules have changed,’ said Gareth Shilton, Ocean’s spokesperson. ‘As an industry, we need to do more to educate buyers and to guide them through a process which many people are finding understandably daunting. For anyone who plans to apply for a mortgage in the next year,… Continue reading
UK home owners increasingly looking to remortgage to a better fixed deal
Up to one in six UK home owners are considering remortgaging over the next six months as the ongoing mortgage price wars cut rates, new research has found. They are targeting average savings of £99 a month, equivalent to £1,188 a year, according to the study by The Nottingham Building Society Nottingham. This comes as Council of Mortgage Lenders figures show that lending for remortgaging increased 15% month on month in recent data and industry experts are forecasting a surge in remortgaging in response to recent rate cuts which have seen five year fixed rates drop below 2%. The Nottingham's research shows five year fixes are the most popular choice for customers considering remortgaging and 27% of potential remortgaging customers would choose a five year fix and 21% a two year fix. The research shows strong demand for fixed rate deals as around three quarters of those considering remortgaging would choose a fixed rate deal. The study found 12% would ideally fix for longer than five years. Just 7% of those surveyed would choose tracker rates while 4% would consider discount deals and 7% say they would choose a standard variable rate. ‘The mortgage price war is interesting to existing home owners who are keen to take advantage of the record low rates. With interest rates expected to rise in the coming years then now could well be the right time for many to consider whether there are savings to be had,’ said Ian Gibbons, senior mortgage broking manager for Nottingham Mortgage Services. ‘Potentially savings are higher than the average £99 a month people are looking for. Someone with a £150,000 mortgage who moved from a deal at 4% to one at 2% could be around £3,000 a year better off,’ he explained. ‘However, to secure the best remortgage deal it is important to look at more than the base rate. You need to search the whole market and to be aware of the product fees that may be charged. A great rate won't save you much if you have to pay a high fee,’ he added. Continue reading
First time buyers in UK need bigger deposits despite Help to Buy scheme
First time buyers in the UK need a £32,000 deposit to buy their first home as average deposits rise to their highest level in a year, new research shows. Despite Help to Buy providing those with small deposits access to high value LTV mortgages, lending is actually decreasing with the average deposit size up from a low of 16% in October last year to 20% or £31,807 now. The analysis found June’s average deposit of 20% to be the same figure as two years ago) before Help to Buy was introduced. Factoring in house price increases over the last two years also means that in monetary terms, the average deposit has risen by 9%, or £2,557, up from £29,250. The Genworth/Moneyfacts study also shows that current average deposit size is equal to 81% of an average first time buyer’s annual income of £39,065 highlighting the difficulty faced in saving such a substantial amount. Across all buyers, the average LTV for house purchase loans also dropped by 2%, from 77% in May to 75% in June. An average deposit of 25% is therefore required as access to high LTV lending impacts not only first time buyers but also those hoping to move up the property ladder. The research also shows that limited access to high LTV lending across all mortgages heightens the challenge for first time buyers in fulfilling their ambitions of home ownership. The study suggest that already a lack of housing supply is crippling the first time buyer market and making it harder for people hoping to move up the property ladder also means that typical first time buyer properties are not being freed up as often as they should. The price gap between 75% and 95% LTV mortgages has narrowed since the start of the year as a result of lower interest rates over the last few months. In January 2015 the price differential was 71% but has since fallen to 69%. However, this remains very high and means those who are unable to save for a larger deposit are faced with charges 69% higher than those who have access to a 25% deposit. On an average first time buyer property of £159,053, those with a 25% deposit pay a monthly fixed payment of just £500, compared to £846 for those with a 5% deposit, a difference of £346. Similarly, the fixed term cost for buyers with a 95% LTV mortgage is £20,307 and just £12,000 for those with a 75% LTV mortgage, a difference of £8,307 or 69%. The report says that as further evidence of the dominance of low LTV lending, the number of products available for those with larger deposits grew faster than the number of new high LTV products; the number of available products at 75% and 80% LTV rose by 280 and 200 respectively in the year to August… Continue reading
