Strong Start for Help to Buy, say Lenders

This article by BBC News Business on November 11th, 2013 reveals that house prices in the UK have returned to their pre-crisis levels.

 

House prices in the UK have returned to their pre-crisis levels according to some figures

 

Two major lenders have reported a strong uptake in the first month of the government's extended Help to Buy mortgage guarantee scheme.

Royal Bank of Scotland (RBS) and Halifax said they had received a total of 2,384 applications, potentially worth £365m in mortgages.

The scheme is designed to encourage lenders to offer mortgages with deposits as low as 5%.

But critics are concerned it could help to create a UK housing bubble.

RBS and its subsidiary NatWest, and Halifax - owned by Lloyds Banking Group - are among the few lenders to offer mortgages under the government's extended scheme.

The first phase of Help to Buy was launched in April, but only provided help to first-time buyers buying new-build homes. The extended scheme applies to all buyers and all types of homes.

RBS said it had so-far approved 169 of its 1,075 applications, and five customers had already completed their purchases.

It said the majority of applications had come from young couples with a joint salary of less than £50,000. The average price of the property being bought was £167,565.

Halifax said more than 80% of its applications under the scheme were from first-time buyers.

It said the majority of applications had come from outside London and the south-east of England, where property prices are rising fastest.

It also said that five purchases had so-far been completed.

Bubble worries

  The government welcomed the figures, saying that the scheme was supporting "responsible lending", helping borrowers would can afford mortgage repayments, but not a large deposit.

"Four weeks in and its clear that Help to Buy is already delivering," said Prime Minister David Cameron.

"Most Help to Buy applicants are first-time buyers, young and have a roughly average household income. This is all about helping hardworking people get on the first rung of the property ladder."

But critics have expressed concern that the scheme could create a bubble in the housing market, making home affordability an even bigger problem.


The latest figures from the Office for National Statistics suggest average house prices in the UK have now recovered from the slump seen during the recession.


Figures from Halifax suggest house prices have yet to hit their 2007 peak, but have risen steadily for the last nine consecutive months.

Nationwide Building Society says prices are currently 5.8% higher than a year ago.

But estate agents argue that much of those price rises are seen in London and the south-east of England, while prices in other parts of the country are rising more slowly, or in some cases actually falling.

Article Source: http://www.bbc.co.uk/news/business-24892649

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UK Mortgage Approvals Highest Since February 2008

This article by Katie Allen of theguardian on October 29th, 2013 tells us the argument about Help to Buy scheme risks may create another bubble according to figures.

The Bank of England mortgage lending figures are at their highest for more than five years. Photograph: Yui Mok/PA

 

Mortgages approved by British lenders jumped to their highest level for more than five years in September, fanning fears the housing market was already heating up even before the latest government support kicked in.

Banks, building societies and other lenders approved 66,735 mortgages in September, the biggest monthly total since February 2008, before the global financial crisis took hold.

The figures, from the Bank of England, were just ahead of City forecasts of 66,000 and compared with an upwardly revised 63,396 in August. Mortgage approvals are seen by economists as a good early indicator of where the housing market is headed.

They follow government data on Monday showing house prices rose in every English region in September and are likely to be seized on by those who argue that the government's Help to Buy scheme risks creating a new bubble.

"All the stimulus thrown at the housing market risks starting another dangerous boom-bust cycle," said Rob Wood, chief UK economist at Berenberg Bank.

"The key issue is not where prices are today, rather it is where they will be in a couple of years. Prices and activity are rising fast now. We expect house prices to rise 10% year on year next year … The measures that selectively boost the housing market, like the Help to Buy scheme, should be scrapped."

The plan to kickstart the property market and help homebuyers struggling to get on the property ladder gives a taxpayer-backed guarantee to lenders offering 95% mortgages that are open to first-time buyers and home movers on newbuild homes worth up to £600,000. Despite criticism from the International Monetary Fund and many economists, the scheme was expanded this month.

In an attempt to quell criticism of his scheme, the chancellor, George Osborne, recently asked the Bank of England to monitor its impact and report back in a year. Howard Archer, economist at IHS Global Insight, said the latest numbers underlined the need for policymakers to be ready to act "quickly and decisively if signs of the housing market overheating become increasingly widespread and pronounced".

Archer said it appeared a number of factors were supporting the property market even before the latest phase of Help to Buy was launched: improved consumer confidence, higher employment and extended low mortgage interest rates, the first stage of Help to Buy and the Funding for Lending scheme – a Bank of England initiative to increase the flow of cheap finance to credit-starved businesses.

"We are currently a long way off from an overall housing market bubble emerging. Nevertheless, there is a mounting danger that house prices could really take off over the coming months, especially if already significantly improving housing market activity and rising buyer interest is lifted appreciably further by the Help to Buy mortgage guarantee scheme," Archer added.

Others argued the housing market was still well below its peak and there were few warning signs of a bubble forming.

Samuel Tombs, UK economist at the thinktank Capital Economics, emphasised that mortgage lending, at £1bn, was only "a touch" above the average of £0.7bn over the previous two years. Mortgage approvals were still close to 40% down on their typical pre-recession levels, he added.

"Given that interest rates on Help to Buy mortgage products look expensive and lending criteria are strict, we doubt the scheme will boost mortgage demand much. Note too that banks appear to have little appetite to substantially increase the size of their mortgage books," Tombs said.

"For now, then, there remains little evidence that a renewed boom in the housing market is developing."

The Bank data contained some evidence that businesses found it easier to get finance in September. After dropping sharply in August, lending to non-financial businesses rose by £720m, the biggest increase since January.

"While it is important not to read too much into one month's figures, the size of the September increase in business lending reported by the Bank of England provides a significant boost to hopes that banks are now becoming more prepared to lend to businesses, given the improved economic situation and outlook," said Archer.

The Bank's data showed, however, that within the overall rise, lending to small businesses fell in September.

The British Chambers of Commerce said small businesses needed more help to get funds.
"It's good to see overall business lending rise, as this has an impact on business confidence. Yet these new figures show that while large firms have little difficulty tapping debt markets, SMEs – and particular young, fast-growing firms – continue to struggle to access growth capital," said Adam Marshall, its director of policy and external affairs.

"Both policymakers and financial institutions need to do more to help fast-growing SMEs access finance."

Article Source: http://www.theguardian.com/business/2013/oct/29/mortgage-approvals-february-2008-help-to-buy

 

Property Asking Prices Continue to Rise in Most of the UK

This article by Property Wire on October 17th, 2013 tells us that UK's residential property asking prices continue to rise according to the latest sector index.

Residential property asking prices in the UK are continuing to rise, up another 2% on last month and now 12% higher than a year ago, according to the latest sector index.
 
The prices in England and Wales are now up 5.5% on last year and the North East, North West and Scotland were the only parts of the UK not to record price rises in the last month.

The Asking Price Index from Home.co.uk also shows that the supply of property for sale across England and Wales is down 18% on last year.

On a monthly basis prices in England and Wales have risen 1%, the largest monthly rise since May 2011. London and the South East still continue to show strong growth and more areas of the UK are contributing to the recovery.

Scotland is now the only area of the UK that is still recording house price deflation, down 1.4% over the last 12 months.

The index  report says that the imbalance between demand and supply continues to dominate the market dynamic. The supply of fresh property stock across England and Wales has contracted by a further 18%, and in London new stock is down by 31% compared to last year.

Growing demand from buyers chasing ever fewer properties has driven down the typical time on market by an average of 8% over the last 12 months.

However, the recent price rises being recorded across the majority of the UK still conceal the bipolar nature of the market. Over the last five years, prices across England and Wales have risen 3.4%, whereas four out of nine English regions, plus Scotland and Wales, have shown price falls over the same time period.

Annual price growth is largely driven by London with a rise of 11.7% with prices in the South East up7%. The South West is vying to become another high performance region, with price rises of 4.6% over the last 12 months. Annual house price rises of 4% in the East Midlands and 3.5% in the West Midlands means that capital invested in those regions is now keeping up with inflation.

A growing concern is that regional house price bubbles are beginning to emerge where demand for housing continues to far outstrip supply. A lack of attractive non-property investment opportunities coupled with the widely reported surge in home prices is making potential vendors hold back, the report suggests.

As a consequence, the flow of new property stock across England and Wales is down 18% on this time last year. Three of the nine English regions are recording even tighter supply figures. Sales stock entering the market is now down 21% in the East and South East, and may well approach the 31% drop seen in Greater London. The flow of new supply in Wales and Yorkshire is relatively strong, with only a 5% fall in stock. Subsequently, average prices in these regions are being kept in check, with rises of 1.5% and 0.6% respectively over the last 12 months.

According to Doug Shephard, the firm’s director, London's property investment bubble continues to expand at an alarming rate. He describes the 2% jump in average prices in the last month alone as ‘simply astonishing’, and pointed out that the increasingly severe shortage of new stock is fuelling the accelerating rate of growth.

The average price of a house in London has broken through the £400,000 barrier for the first time and is 15.3% higher than five years ago. The growth is not showing any signs of slowing down and even the South East, with annual price growth of 7%, doesn't come close the capital's performance. Currently, only 60% of the properties for sale within a 10 mile radius of the centre of London are priced below the Help to Buy scheme threshold of £600,000.

‘House price growth is now sweeping north and west from the capital. Welcome news for home owners, but troubling for potential buyers whose salaries are not increasing anywhere near as fast,’ said Shephard.

‘Price rises in London and its surrounding regions have now established a solid two year trend, and one may well conclude that these property markets have fully recovered.

However, a true recovery cannot be complete without considerable improvement in the underlying economy, which is currently looking like a one horse race. Until real wage growth matches house price inflation, housing affordability will become increasingly difficult and a distant dream for many,’ he explained.

‘The ongoing availability of government backed cheap lending is already encouraging overall price rises over and above inflation. A key concern is that the impending Help to Buy scheme will only exacerbate affordability problems. Further market stimulus may be justified in selected areas such as the North, but certainly not across the whole UK, as that would significantly raise the risk of another property crash,’ he added.

Article Source: http://www.propertywire.com/news/europe/uk-property-asking-prices-201310178359.html

U.K. House Prices Rise to Record as First Timers Drive Demand

This article by Eshe Nelson of Bloomberg on October 11th, 2013 tells us the rise of house prices in UK last month that influences first-time buyers back to the market.

U.K. house prices rose to a record last month as easier access to credit drove first-time buyers back to the market, Acadametrics said.

Values increased 0.5 percent from August to an average 235,534 pounds ($376,000), the London-based real-estate researcher and LSL Property Services Plc (LSL) said in a report today. London is leading the property-market recovery, with annual house-price growth in the past three months more than double any other region in England and Wales.

The second phase of the government’s Help to Buy program was introduced this week, providing government-guaranteed mortgages to buyers with smaller deposits. The acceleration has fueled further concerns that the initiative may stoke a bubble. Mortgage approvals rose to the highest in more than five years in August, the Bank of England said last week.

“We’ve seen banks ease criteria on mortgages for people with small deposits, which has opened the door to new buyers who have spent years on the outside looking in,” said David Newnes, director of LSL Property Services. “Demand has increased significantly in a short space of time, and raced ahead of the supply of homes.”

Nine of the 10 regions tracked by LSL recorded price gains in the latest three months compared with a year earlier, according to the report. London price growth was 8.5 percent, compared with an average of 3.5 percent. In Wales, the pace of the decline eased.

Nationally, house prices rose 3.8 percent, or 8,526 pounds, in September compared with a year earlier.

House sales rose 12 percent this year compared to 2012, with the increase in transactions predominantly in the first-time buyer sector of the market, Acadametrics said.

LSL said concerns about a housing bubble developing are overblown. While prices are rising, it is only a “fledgling recovery,” Newnes said. “It is not a boom or a bubble. It is a market correction, albeit a fairly quick one.”

The whole country will benefit from Help to Buy because it supports buyers in the southeast, where prices are higher, and in the north, where wage growth is slower, Newnes said. He added that the program must be complimented by more house building so supply keeps pace with demand.

Article Source: http://www.bloomberg.com/news/2013-10-10/u-k-house-prices-rise-to-record-as-first-timers-drive-demand.html

UK Property Market Comes Back to Life

This article by Richard Watts of Investment Europe on October 7th, 2013 reveals the recovery of the UK property market after the series of breakdown.

As the UK property market comes back to life, the UK mid-cap equity market is increasingly the place to find interesting opportunities, according to Richard Watts,portfolio manager of the Old Mutual UK Mid Cap Equity Fund. 

Housing has a unique place in the UK economy. There is a special sense of fulfilment in home-ownership. ‘First-time' buyers have a priority on the political agenda, while rising home values translate to near-instant voter gratification. A revival in the housing market is front-page news.

This national attitude to our homes creates a number of anomalies. One is the traditional approach to investing in the housing market through direct purchase, buying or upgrading a home or taking on buy-to-let. Home-ownership can be immensely rewarding, but a house is a particularly illiquid investment, while mortgages create a conduit from Bank of England base rates to disposable income that is short, brutal and sometimes nasty.

The flotation of Foxtons, the London-area estate agent, is a sign that the equity market is increasingly providing an alternative route to participation in the property market. A basket of shares might not keep you warm at night, or not in a literal sense, but it is a lot more liquid, shouldn't require a six-figure mortgage and its sensitivity to interest rates is a little less direct.

The Foxtons IPO was heavily over-subscribed, rising 16% on the first day, valuing the business at over £650m. Foxtons have some 40 offices, mainly in central London. It is an exceptionally well-run company, with special strength in marketing. The average price of its house sales is £400,000, which puts it in the sweet spot in terms of transaction growth as the recovery develops. It is the right section of the market for the second phase of Help to Buy, which will provide mortgage indemnity for homes worth up to £600,000. In our view, Foxtons is in a position to increase its footprint potentially to 100 offices and possibly more.

Foxtons is not the first estate agent to come to the market. Countrywide floated in March and has outperformed the FTSE All Share (ex investment trusts) by 40% since then (to 24 September). Savills, since its near-term trough in the midst of the eurozone crisis on 4 October 2011, has outperformed the FTSE All Share by 134%.

Estate agents are an interesting and expanding area of the equity market, but the heart of the sector in equity terms is the housebuilders. The sector has seen tremendous outperformance in recent years, with key companies such as Persimmon and Barratt Developments, which over the past three years have outperformed the FTSE All Share by 126% and 156% respectively. In our view, despite inevitable set-backs, the sector should continue to offer robust, market-leading returns.

Current demographics suggest the demand for new housing in the UK should run at around 260,000 units per year, but the market is only supplying half that, around 130,000. It is highly unlikely that supply will reach, let alone overtake demand, on almost any scenario.

The block has been financing, with capital constrained banks requiring significant cash deposits. The government - and everybody who reads a newspaper or watches television or listens to the radio - is aware of this and given the economic benefits of house-building it has taken some bold measures.

The first phase of Help to Buy, under which the government lends new home-buyers 20% of the price towards a 25% deposit, is already having a significant impact, with 30% of new-built homes being reserved through the scheme. The second phase starts in 2014, providing mortgage guarantees, and should stimulate the market further. The schemes are intended as temporary kick-starts, but the first phase is proving so popular its £3.5bn funding is likely to expire at some point in 2015 - a date whose proximity to the next election suggests to us that it could be replaced, should need arise, by something either as good or better. In the meantime, the banking sector should by then be further on the road to recovery, opening the possibility that affordable commercial mortgages will increasingly become available.

A less publicised but important change is in planning law. Under the new National Planning Policy local authorities are required to maintain a five year plan. In the absence of such a plan, where any planning application is denied, it will be automatically granted on appeal.

This has unleashed fresh tracts of buildable land, a flow unlikely to be completely staunched as plans come to be adopted more widely. So much for the environment - what about the stock specifics? Housebuilders have done well - is there more to come? In my view there is and the numbers tend to support a positive argument. The key decision is whether the UK property market will continue to recover into the medium to longer term.

Let's take Barratts as an example. We believe they are capable of achieving a return on equity of around 18% on a 2-3 year view as they build out land acquired in recent years at attractive profit margins. We expect the industry to be building around 170,000 units a year by the end of this period, significantly higher than current levels but still well below the demographic requirement. From this level, we believe it fair to assume that Barratts' unit sales can continue to grow at relatively modest minimum of 4%-5% a year - given natural demand, government support and ongoing economic recovery - that would leave Barratts with around 75% of its earnings free to distribute as cash to shareholders, which at current share prices implies a dividend yield at around 10%. That is a high yield for a well-run business in a growing market and we would expect most investors to accept something significantly lower, possibly down to around 5% - and that, in turn, implies a much higher share price.

One of the most satisfying aspects of investing in UK mid-cap equities is the dynamism and variety of the opportunities. As the property market comes back to life, it is likely there will be mid-cap companies there to reap the benefits. And as they say in the property business - we are eager for further developments!

Article Source: http://www.investmenteurope.net/investment-europe/opinion/2299147/uk-property-market-comes-back-to-life-says-old-mutuals-watts

Home Loans Rocket to a 5-Year High

This article by the Express on October 1st, 2013 shows the confirmation from the Bank of England regarding the rise of mortgage approvals as property market strengthens.

 

Mortgage approvals soared to a five-year high in August as the property market recovery goes from strength to strength, the Bank of England confirmed yesterday.

Lenders approved 62,226 mortgages – up from 60,914 in July and the highest since February 2008.

Remortgages approved also rose to 36,225 – the highest level since February 2011.

Jonathan Hopper, managing director of property search consultants Garrington, said: “The mortgage market is out of the infirmary and running, not walking, back to health.

“The resurgent property market is matching it step for step.

Average prices are on the up in every region for the first time in a long time

Jonathan Hopper, managing director of Garrington property search consultants

“It’s telling that the Nationwide House Price Index is now showing average prices are on the up in every region for the first time in a long time.”

 Article Source: http://www.express.co.uk/news/property/433443/Home-loans-rocket-to-a-5-year-high

Property Sales Pick Up But Market Needs First-Timers

A new prediction shows a rise in local house prices from next summer as first-time buyers increases according to this article by The Courier.co.uk on September 19th, 2013.

A Tayside property expert has predicted a rise in local house prices from next summer as the number of first-time buyers increases.

Lindsay Darroch, head of property at Blackadders, is also confident of sustained recovery by summer 2015.

He said: “I think we will continue to see an improving housing market with activity levels rising. From the summer of 2014, I would expect to see a rise in property prices as the number of first-time buyers increases.

“The consequence of this will be a greater willingness from lenders to fund developers, which will have a positive impact not only in the housing market but on the economy as a whole.”

Mr Darroch said that market activity in the past 12 months has increased by about 20% to 25%.

He said: “Although we have seen an increase in the number of closing dates, prices have stabilized, not increased.

“Sellers are now more realistic about their price expectations and this has contributed to improving the Scottish housing market.

“This realism has been driven by an appreciation that, if they are moving up in the property market, the price paid or received is not as important as the cost of change.”

Article Source: http://www.thecourier.co.uk/news/local/perth-kinross/property-sales-pick-up-but-market-needs-first-timers-1.132593

First Time Buyers Advised To Focus On Affordability

First-time buyers are advised to make sure to look beyond the property rate even if higher loan-to-value mortgages are back as revealed in this article by TheGuradian on September 15th, 2013.

First-time buyers are flooding back to the housing market as economic conditions improve, alongside fears that low mortgage rates won't last and a fresh housing bubble will push house prices beyond reach.

Mortgage lenders reported a 41% increase in first-time buyer numbers in July, while the National Association of Estate Agents says they account for a quarter of house purchases in August, the highest proportion since July 2010.

However, getting a deposit remains a stumbling block for the majority of those keen to buy. The latest figures from LSL Property Services show that the number of first-time buyers who were able to buy without help from their parents fell to 41% in July, from 51% in April.

House price rises in some areas of the country will lead some to fear that they cannot save at the same rate as prices climb, says David Hollingworth of broker London & Country. "If prices continue to rise, the deposits they have worked hard to amass could be eroded as a percentage of the purchase price."

High loan-to-value (LTV) deals such as Northern Rock's 125% mortgage, viewed by many as fuelling the appetite for credit ahead of the financial crisis, are not back on the shelf. However, lenders have started to offer more deals at higher LTVs, and there are plenty of options for borrowers with small deposits.

According to Moneyfacts.co.uk, there are 409 deals for borrowers with 5% and 10% deposits, compared to 321 in August 2012, and some of the rates on offer at 90% LTV are very competitive.

The lowest rates are available on deals fixed for two years. On Friday, Chelsea building society launched a two-year fixed-rate mortgage at a rate of 3.54% for borrowers with a 10% deposit, with a fee of £1,675. HSBC also offers a two-year fix, at 3.59% at 90% LTV with a £1,499 fee.

However, Hollingworth favours Skipton building society's two-year fix at 3.99% at 90% LTV with £160 cashback. "This deal is a good all round package with a low rate, no fee and cashback on top," he says. "There are lower interest rates on offer from other lenders, but the fees can be high, which will add a chunk to the overall value." Borrowers who can stretch to a 15% deposit could consider the two-year fix from Market Harborough building society at a rate of 2.79% and with a £995 fee. Chelsea also offers a two-year fix at 2.94% at 85% LTV.

A two-year fixed rate could appeal if you want to keep your monthly repayments down, but bear in mind that when that period ends you will move on to your lender's standard variable rate, which is likely to be higher. By that point interest rates may also have risen.

To cement your repayments for longer, there are several five-year fixes, although rates are higher. Nottingham building society offers one at 4.39% at 90% LTV with a £299 fee, while Chelsea offers one at 3.84% with a £1,545 fee. Tesco Bank has a deal at 3.69% with a £1,495 fee, and the Post Office has a rate of 3.75% with a £995 fee, both at 85% LTV.

There is still very little for borrowers who can only stretch to a 5% deposit, Hollingworth says, and rates are relatively high. Newcastle building society, for example, has a two-year fix at 5.99% at 95% LTV with a £195 fee.

Brokers warn that borrowing large amounts at record low mortgage rates may not be wise.

Adrian Anderson, director of broker Anderson Harris, says: "The important thing is not to overstretch yourself. So ask yourself: can you afford the deposit and the mortgage payments? Have you opted for a fixed rate to protect yourself against interest rate rises, if you think they are on the cards?"

Yet before buyers reach the stage of getting a mortgage, a lack of housing supply could cause problems. David Newnes, director of LSL Property Services, says: "Pressure is growing on the government's plans to lend a helping hand to the house building sector, as it needs a bigger lift. There's a lack of new homes being built, and as the number of buyers rises in line with the growing population, competition is getting stronger for the supply of properties."

Article Source: http://www.theguardian.com/money/2013/sep/15/first-time-buyers-focus-affordability

Mortgage Lending Booms as Iinterest Rates Hit Record Low

This article by Hilary Osborne of The Guardian on September 10th, 2013 shows that gross mortgage lending reaches highest level since the 2007 crash fueled by government loan schemes and economic optimism.

Gross mortgage lending reached its highest level since 2007 in the second quarter of 2013, as the cost of borrowing fell to the lowest level on record, according to figures from the Bank of England.

Sharp increases in the number of first-time buyers and buy-to-let landlords entering the market fuelled a busy three months for the mortgage industry.

A total of £41.6bn worth of new loans were advanced to borrowers, a 23% increase on the first quarter and 13% higher than in the same period of the previous year.

The quarter-on-quarter leap in lending is the biggest since 2007, when the housing market boom was in its final throes.

Lending to first-time buyers saw a big increase, as banks and building societies became less reluctant to offer mortgages to borrowers with small deposits. The Bank's figures show that the share of the market taken by mortgages at a high loan to value, which it defines as above 90% of the property's price, increased from 2.1% in the first quarter to 2.5%.

The value of mortgages advanced to new entrants in the property market was up by 31% year-on-year, at £8bn. Over the same period new lending for buy-to-let increased from £3.9bn to £5bn.

The mortgage market has been fuelled by a combination of factors, including positive economic data and government stimulus in the form of the Funding for Lending and Help to Buy schemes.

The impact of Funding for Lending, which offers banks and building societies access to cheap funds to encourage them to offer loans to businesses and households, is underlined by the Bank's data for mortgage interest rates.

It shows that the overall average interest rate on gross advances fell to 3.47% in the second quarter – the lowest interest rate on record.

Some of the low rates have encouraged remortgage activity, and net mortgage lending which takes into account repayments and redemptions showed a smaller annual increase than the headline figure, rising by 8.6% to a total of £5.1bn.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: "Funding for Lending and Help to Buy are resulting in cheaper mortgage rates, which is encouraging borrowers to finally take the plunge.

"Growing confidence in the housing market as prices rise, particularly in London and the south-east, is also stoking the market."

Earlier, the Royal Institution of Chartered Surveyors became the latest organisation to warn that the Help to Buy scheme could push prices to unaffordable levels.

Rics said house prices in the UK were rising at the fastest pace in almost seven years, echoing similar data from lenders Halifax and Nationwide.

Article Source: http://www.theguardian.com/money/2013/sep/10/mortgage-interest-rate-record

UK’s Flagship Funding for Lending Scheme Boosts Property Market

Funding for Lending scheme provided a strong foundation for growth in the property market in which mortgage borrowers in the UK are benefiting from as revealed on this August 2nd, 2013 article by the Property Wire.

The latest figures from the Bank of England shows that net lending by banks and building societies participating in the Funding for Lending Scheme increased by £1.6 billion in the second quarter of 2013.

The biggest net lenders between March and June this year were Nationwide, Lloyds, Barclays and Virgin Money, the Bank of England said.

The reaction for the home lending industry is positive. Paul Hunt, managing director of Phoebus Software said mortgage lenders’ progressive attitude has helped boost the market as their willingness to lend through the provision of innovative products is helping first time buyers.

‘In particular banks have used the Funding for Lending scheme to allow more competitive mortgage rates and by providing higher loan to value mortgages which has resulted in a significant jump in first time buyers loans recently,’ he explained.

‘The revival in first time buyer numbers demonstrates not only the underlying buyer demand, but that lenders have pushed the market forward to unlock this demand. Further relief for banks and building societies has been found in the scheme, as it has provided lenders with the means to drive growth in mortgage lending,’ he added.

According to Brian Murphy, head of lending at the Mortgage Advice Bureau (MAB), said it has also helped mortgage costs come down.  ‘The success of the Funding for Lending Scheme’s has been clearly demonstrated by banks and building societies boosting lending and reducing costs, with benefits of cheaper funding rife in the mortgage market,’ he pointed out.

He explained that since the start of the scheme average fixed rate mortgages have fallen by at least one percentage point across two, three and five year deals, while total product numbers have soared to over 10,000 for the first time in five years.

‘Yet as mortgages rise in number and fall in price, it’s been borrowers with sizeable deposits who have reaped the greatest rewards. In the past 12 months the typical purchase loan to value (LTV) has actually fallen slightly for homebuyers, stifling improvements in market access for those with smaller savings pots,’ he added.

‘As FLS enters the third quarter of 2013, we hope to see lenders extend the benefits of falling funding costs to higher risk sectors, combating the risk of rising house prices locking out a larger proportion of potential buyers,’ he also said.

Article Source: http://www.propertywire.com/news/europe/uk-propety-lending-boost-201309028185.html

Renting Cheaper Than Buying in London, the South East and Scotland

According to this interesting article by Nicole Blackmore of The Telegraph on August 31st, 2013 renting is cheaper for first-time buyers in London especially in South East and Scotland than buying property.

Inflated house prices mean mortgages are less affordable than renting for many, even with a 20pc deposit. 

It is cheaper for potential first-time buyers in London, the South East and Scotland to continue renting than to purchase property thanks to rapidly rising prices.  

New research from mortgage lender Santander shows inflated house prices in London mean potential first-time buyers would need to find an additional £478 a month to buy, sparking fears that more people will be priced out of the market.

The average monthly mortgage repayment for first-time buyers in the capital is £1,342, compared to the average monthly rent of £864.

Data released by the Council of Mortgage Lenders this week showed first-time buyers in London are having to stump up a record £64,000 average deposit just to get on to the property ladder.

In the South East the average first-time buyer would have to pay £56 more a month to buy a property than rent, with this figure rising to £84 in Scotland.

However, renters living outside these three areas who have a 20pc deposit could save an average of £1,740 a year if they buy their own property.

The average monthly rent in the UK, excluding London, the South East and Scotland, is currently around £480 compared to monthly repayments of £335 for the average first-time buyer – a saving for homeowners of £145 a month.

The research into typical first-time buyer properties found the average price across the country, outside of London, South East and Scotland, is £85,955. This means that a first-time buyer applying for an 80pc loan-to-value mortgage would require a deposit of £17,191.

Phil Cliff, director of mortgage marketing at Santander UK, said: “When we first conducted this research in 2010, London was the only UK location where it was cheaper to rent than buy. Now, a demand for housing and rising house prices has seen both the South East and Scotland join its ranks.” 

Article Source: http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/10274296/Renting-cheaper-than-buying-in-London-the-South-East-and-Scotland.html

UK's Help To Buy Scheme is Threatened by the Rising House Prices

This interesting article by the Property Wire on August 29th, 2013 shows the unity of mortgage brokers and intermediary lenders in raising their concern about inflated house prices being the gravest threat to the success of the Help to Buy scheme.

According to the latest outlook report from the Intermediary Mortgage Lenders Association (IMLA) almost two thirds of intermediary lenders and brokers, 60% and 59% respectively, single out a house price bubble as the most likely factor that may undermine the government scheme.

The research shows lenders already anticipate a 2.7% increase in the average house price by the end of the year, pushing it to £166,418 according to the Land Registry measure. Lenders’ prediction is based on the market’s performance in the first half of 2013 and the initial impact of the Help to Buy equity loan scheme.

If this same growth rate continues for the duration of Help to Buy, the average house price will reach £180,265 by the end of 2016, an overall rise of 11% in four years. This would bring house prices close to their last peak of £181,975, which was recorded in November 2007. There are concerns that the rate of increase could be even greater with the upcoming Help to Buy mortgage guarantee offer still to launch in January 2014.

Brokers also register significant concerns about a potential lack of lender support for Help to Buy, with almost half, 48%, worried this will jeopardise the scheme.

Just 20% of intermediary lenders openly share this sentiment yet 47% see capital weighting requirements as a major barrier to success. The detail of capital relief is still to be confirmed by the Treasury and will greatly influence lenders’ ability to back the initiative.

The same proportion of the lending community is concerned that an over reliance on government funding will handicap Help to Buy, while 27% cite structural weaknesses in the mortgage market. This market imbalance is of as much concern as a change of government in the next general election with 27% saying so.

Despite these concerns both groups agree that first time buyers will see the greatest benefit from the upcoming Help to Buy mortgage guarantee with 100% of lenders and 89% of brokers taking this view.

Lenders are more optimistic than brokers about home movers benefitting at 80% compared with 56%. While the guarantees will also be available to existing home owners seeking to move to another lender, just 13% of lenders and 6% of brokers see the scheme as benefitting home owners remortgaging their properties.

‘Pleasing though it is to see increasing levels of activity in the market and a swell of consumer interest, these findings spell out the importance of keeping control over any future growth,’ said Peter Williams, executive director of the IMLA.


‘There is a clear consensus that first time buyers stand to benefit most from the second part of Help to Buy. But if house prices continue to rise for the duration of the scheme, then in essence we will be giving with one hand and taking away with the other. Moreover the exit from the scheme will need to be managed very carefully so it without causing serious harm to the market,’ he explained.

‘If people are struggling to raise deposits in the current climate then a further 11% increase in house prices will lift the property ladder even further out of reach for some. House builders are attempting to bridge the ever growing chasm between supply and demand which is going to be essential to ensure we help more people to access the property ladder without creating new hurdles in the form of inflated house prices,’ he pointed out.

‘In the meantime, the pressure is on to ensure Help to Buy is more inclusive than divisive. Agreement on capital weightings and on the fee lenders will be charged to participate are crucial to ensuring the scheme is made affordable for lenders as well as consumers if we want to see a similar impact as the current equity loan scheme,’ he added.

Meanwhile, most of the 10,148 reservations for new build homes have been in the regions, official data on Help to Buy shows.

Interest in the Midlands has been most keen, with nearly four times as many reservations of new build homes than in London.  Reservations in the East and South East have also been high, as have those in the North West of England.

The regional take up of the equity loan part of the Help to Buy scheme has lifted confidence in these areas, with many mothballed housing schemes now springing back to life as a result of the increased demand from buyers, according to property firm Knight Frank.

House builders have been quick to report that they envisage increasing their output in the coming year and there was an encouraging rise in the number of new private housing starts between April and June, rising 7% on the quarter, indicating Help to Buy was having an effect.

The firm said it is worth noting that it is not working in isolation. ‘The government’s funding for lending scheme has helped drive down the cost of mortgages, and this, coupled with a slight loosening in lending criteria and the ultra low bank base rate has led to a sharp rise in the number of first time buyers, an encouraging sign for a return to a more fully functioning housing market,’ it says.

Article Source: http://www.propertywire.com/news/europe/uk-help-buy-scheme-201308298172.html