Mortgage Lending Slow in Early 2015

According to trade body the Council of Mortgage Lenders (CML), mortgage lending has been slow through the first quarter of the year. The CML described the sector as suffering from a “sluggish start” to 2015, but says that things have picked up over the last few weeks.

Gross figures for mortgage lending in Q1 2015 were down 12% compared to the previous quarter. Lending in the first quarter of this year was also down compared to the same three months in 2014, showing a 3% decrease year-on-year. Overall, the first three months of the year saw a total of £44.9 billion lent to home buyers, according to the CML’s figures.

This could be partly down to the introduction of stricter affordability checks, to which would-be borrowers are subject before qualifying for a mortgage. These rules have now been in force for a year and more recently have also been applied to buy-to-let mortgage. They require mortgage lenders to make a close, highly-detailed study of the income and outgoings of potential borrowers before granting credit, and according to the National Association of Estate Agents (NAEA), this is slowing down the process of buying a home significantly.

Mark Hayward, NAEA managing director, said: “A drop in the number of buyers is the direct result of a slow-down in acceptance of mortgages, with it now taking an average of 50 days to receive a mortgage offer.” The new rules also, Hayward said, increases the risk of sales failing to go through.

However, the CML’s figures show that things have been picking up after the “sluggish start” at the beginning of the year – even within the space of the first quarter. Lending was significantly higher in March than in February, and indeed March was a fairly strong month for the mortgage lending sector. With a total of £16.5 billion lent in the form of home loans across the month, March saw fully 21% more lending for mortgages than February. While the quarter as a whole may have seen lending fall compared to the same period last year, March this year saw an increase of 7% compared to March 2014.

According to the CML’s chief economist Bob Pannell, “the underlying lending picture is stabilising.”

“Sentiment and activity,” he continued, “are showing early signs of improvement, and should be further supported by the effects of stamp duty reform. We expect to see lending strengthen over the next few months.”

Over the past few weeks, mortgage lenders have been reducing their rates, and the resulting cheaper mortgages may have helped stimulate the recent upturn in activity.


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Should Buy to Let Mortgages Be Banned?

Following the now infamous Banking Crisis that brought the world economy crashing down, we want to ask if it’s time to ban Buy-to-Let mortgages.

Should Buy-to-Let Mortgages Be Banned?online survey

If the main cause of banking crash was infact the sub-prime housing market, then does it not make sense to do away with the offending product.  Without buy-to-let mortgages, the number of private landlords would be reduced, competition for houses would reduce, and it follows that houses prices would also reduce… but is that such a bad thing?

Our guess is that it would make houses more affordable to first time buyers and push out the landlords.

But we do understand that this is not that simple.  Those with mortgages on a high loan to value (LTV) ratio, are already worrying about negative equity so a further drop in house prices will surely mean that they will be unable to sell or move.

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Buy to Let Mortgage Market Still in a Slump

While buy-to-let mortgage market has temporarily come to a stop, in its early recuperation, in the first three months of 2011, reports from the Council of Mortgage Lenders illustrate a total of £2.9 billion landed ahead of the expected time in the hands of investment landlords during the first quarter – standing at a lower percentage of 3.5% compared to its performance in the last three months.

The CML further stated the plummet was a mirror of the 11% descent of the far-reaching mortgage industry.

This however, devastates property-owners who are trying to widen their portfolios in order to catch up with the growing demand for tenement accommodations.

Buy-to-let mortgage figures have doubled equivalent to two – and- a- half – years since financiers made a come back to the industry.

The growth of this choice reflects present statistics of an increase in the quantity credited in advance.

Loan-to-value ratios remained unaffected in the first quarter at 75% while the average minimal rental cover requirement still at 125%, this is because Financial Institutions fell short on loosening the lending criteria

In the first three months, the number of repossessed buy-to-let properties went up slightly to 1,700 from 1,400 in the previous quarter; equivalent to 0.13% of owner-occupied properties taken back by lenders

There was however a little increase in investment by investors who were 3 months behind their 22,000 credit. The number of increased investment rose to 31,800 which included cases where tenants pay rent to the mortgage lender instead of the landlord, which equates to 2.24% of buy-to-let loans.

General Director of CML quoted “Buy-to-let continues to progress positively in the context of a stable, but still low-volume, over all market. Demand for rental property remains strong, and as more funding becomes available we would expect to see buy-to-lending increasing.”

In addition, He said that “the performance of buy-to-let loans is also holding up well, and the differential between arrears rates in the buy- to-let-sector and the owner-occupier sector has narrowed substantially so that there is now only a modest difference between them.”

If house prices drop by 5% this year and further of the same figure then 30% of buy-to-let borrowers should be prepared for possible additions on top of their mortgage than their property’s worth by 2012, rating agency Standard & Poor’s claimed.

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House Prices Continue to Drop

House prices have dropped 1.4% from March to April 2011, to 160,395 according to the Halifax index’s record. The said drop was due to the lack of confidence among homebuyers continued to weigh heavily on the property market.

Cash-rich buyers who’re outside of in-demand areas are taking full advantage of low mortgage rates thus, the market remains stuck in the doldrums.

Lack of forced sellers due to many existing homeowners who are enjoying low mortgage rates are putting a prop under the market.

According to Halifax even with the gloomy economic mood and austerity, measures start to take effect. Prices were seeing a “modest decline”, a tad slower when the housing slump hit rock bottom during the aftermath of the credit crunch.

On a three-monthly basis, it is viewed as a more secure measure than the volatile monthly figures which on April, prices were down 1-4%.

According to Martin Ellis, Halifax housing economist “ Weak confidence among households, partly due to uncertainty over the economic outlook is constraining housing demand and resulting in some downward movement in prices.”

A relatively low burden for servicing mortgage debt and increased figure in employment are the likely to be providing support for the house prices, curbing the pace of decline are the signs of a modest tightening in housing market conditions.

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