Net lending totalled £86m for the month, down from June’s £518m and the second-lowest monthly lending figure since the Bank’s [...]]]> Bank of England report shows mortgage lending at it’s second lowest level since records began.
Mortgage lending fell sharply in July as activity in the housing market remained subdued, according to Bank of England figures released today.

Net lending totalled £86m for the month, down from June’s £518m and the second-lowest monthly lending figure since the Bank’s records began in 1993, although there have been two months when net lending was negative.

The number of mortgages approved for house purchases edged ahead slightly during the month, rising to 48,722 from 48,562, well down on the levels of more than 100,000 a month seen during the housing boom. The figure was also down on the high of slightly more than 59,000 in November.

Meanwhile, net lending by mutuals remained in negative territory at -£379m in July compared with -£432m in June, according to the Building Societies Association (BSA). Adrian Coles, director-general of the BSA, said: “There remain significant challenges such as heightened uncertainty about job prospects and household incomes, potentially limiting future demand. This could make it difficult to sustain the growth in activity.”

There was a slight increase in the number of people remortgaging during July, the Bank of England said, with approvals for those switching to a new deal reaching 26,951, slightly up on the previous six-month average, but there was a small dip in those unlocking equity from their home or taking up a buy-to-let mortgage.

Unsecured borrowing also remained subdued during July, with net lending rising by £173m. Within the total, credit card borrowing rose by £213m, but lending through loans and overdrafts contracted by £41m.

The BSA also announced that, excluding interest added to accounts, £1.3bn was withdrawn from savings accounts at mutuals in July, compared with £0.3bn in June.

Coventry Building Society has become the latest mortgage lender to [...]]]> More than one million home owners on interest only deals face a sharp rise in interest rates when their current deal expires.
Banks and building societies are increasingly nervous about offering interest only mortgages deals to borrowers, ahead of new lending rules, designed to curb excessive lending.

Coventry Building Society has become the latest mortgage lender to stop offering interest-only deals to first-time buyers. And there are fears that other lenders may be reluctant to offer these deals to people remortgaging, particularly if they have little equity in homes.

With house data suggesting a dip a prices again, this equity is likely to be squeezed further in coming months.

It is estimated that more than one million people took out these loans between 2005 and 2009, as house prices boomed.

Interest only mortgages were traditionally sold alongside a repayment vehicle, usually an endowment policy or, as these fell out of favour, an Isa. The assumption was that the growth on these investments would be sufficient to repay the money borrowed at the end of the mortgage term.

But the Financial Services Authority, and the Ombudsman are increasingly worried that many of these home owners have no means of repaying this capital – and could potentially lose their home at the end of the mortgage term.

When house prices were racing ahead many people used the mortgages to gain a rung on the housing ladder. If you could afford to repay £1,000 a month on an interest-only basis you could – when banks had far more generous lending criteria – get a loan of £350,000; on a repayment basis, this same payment would mean a loan of just £200,000.

Now regulators are putting pressure on banks and building societies to defuse the “mortgage time bomb”. Lenders will be trying to switch people back onto a repayment deal, where the capital is gradually repaid over the term, but this will mean a sharp increase in monthly payments.

Banks and building societies will also be obliged to tighten lending criteria and required to use a repayment mortgage as the basis for calculating affordability. This doesn’t mean interest-only mortgages will be banned, but it will stop people using them solely as a way to increase their borrowing ability.

But some of [...]]]> More families will lose their homes, charities warn, as the Government prepares to reduce the amount of financial support it provides to borrowers by as much as £200 a month.
The latest repossession statistics showed numbers dropping after the Government introduced several measures for home owners who lost their jobs amid the economic downturn.

But some of this support is now being reduced. It includes Support for Mortgage Interest, which is paid to those on income-related benefits – such as Job Seeker’s Allowance – at a rate of 6.08 per cent.

The rate is paid regardless of how much a borrower actually pays to their lender – so it could mean that a home owner potentially ends up with a surplus of Government cash after paying out a lower mortgage rate to their bank.

This has prompted the Government to announce that it is cutting the rate to just 3.75 per cent from October 1. The new rate is based on the average mortgage rate provided by the Bank of England.

But charities warned the new rate will be too low for many home owners who will be left with a significant shortfall if they are still paying a higher mortgage rate.

The 2.33 per cent cut in Support for Mortgage Interest Support equates to as much as £202 less a month or £2,424 less a year on a typical £150,000 mortgage.

It comes after Shelter warned earlier this year that more than five million home owners will be unable to afford a rise in interest rates and will be in danger of being evicted from their homes.

While repossessions are lower than originally feared, home owners with tracker mortgages will see their monthly repayments rise if interest rates go up. Many borrowers who have come to the end of their original deal have already seen their costs increase.

Repossessions fell to 9,400 in the three months between April and June, down from 9,800 in the previous three months and 11,800 during the same period a year earlier, according to the Council of Mortgage Lenders.

The CML has revised its forecast for the number of repossessions this year from 53,000 to 39,000.

The number of loans approved for those buying a [...]]]> Home owners have so little equity left in the homes after the credit crisis that they are struggling to remortgage, experts warned.
The latest lending statistics suggested the number of people who remortgaged their homes in June was just 27,000, down 20 per cent on a year earlier.

The number of loans approved for those buying a new home rose 19 per cent in June on the previous month, according to the Council of Mortgage lenders, but experts said it was not unusual for the summer months.

Lenders are cherry-picking borrowers who have the largest deposits amid a backdrop of rising repossessions.

First-time buyers currently pay a typical deposit of more than £35,000, separate research from Nationwide suggested earlier this week. It is a significant increase from the average deposit of £1,300 required 25 years ago.

House prices recovered some lost ground during the past year amid a shortage of supply of suitable properties. However, they remain below the levels seen before the credit crisis began in August 2007.

Paul Samter, an economist at the CML, said: “For the time being, the effects of government spending cuts have yet to make an impact on mortgage demand, and activity continues on its upward trajectory.

“But we still expect house purchase activity to be muted in the coming months. Both consumer demand and lending capacity remain distinctly difficult to call, especially in the light of the government’s austerity measures and their possible impact.”

Concerns about the economic outlook have helped to spur Britons to put more money aside every month, according to National Savings & Investments.

People are now typically saving £85.21, up from £81.94 in the last quarter, it said.

Home owners are particularly vulnerable if interest rates go up as they would be likely to see a sharp increase in their monthly mortgage payments.

The CML said activity was “still on an upward trajectory” and described [...]]]> Mortgage lending to home buyers increased again in June according to the Council of Mortgage Lenders (CML).
Its figures showed that there were 52,000 new loans granted to home buyers, 19% more than in May and up 14% on the same month a year ago.

The CML said activity was “still on an upward trajectory” and described the rise in June as “significant”.

However, the lenders’ organisation said it was still cautious about the prospects for the coming months.

“This is now the 12th consecutive month in which lending has been higher than its year-earlier levels,” said CML economist Paul Samter.

“But we still expect house purchase activity to be muted in the coming months.

“Both consumer demand and lending capacity remain distinctly difficult to call, especially in the light of the government’s austerity measures and their possible impact,” he added.

Falls in their investments as a result of the worst economic crisis in a generation [...]]]> Hundreds of thousands of retired home owners face have having their homes repossessed as banks refuse to extend their mortgage terms.Lenders have imposed tight age restrictions on elderly borrowers who have been unable to pay off their mortgage before reaching retirement.

Falls in their investments as a result of the worst economic crisis in a generation mean many have been left with ongoing debts. As many as one in six retired home owners still have a mortgage, according to latest figures.

It means 1.35 million people in retirement still have an average mortgage of £50,100, an increase of £8,000 from a year ago.

Lenders have cut the maximum age they will lend to amid the credit crisis, with many introducing a cap of 65 years old.

As a result, retired home owners with a mortgage are struggling to find new deals and face being evicted from their properties if they do not have the cash to pay off their remaining home loan with one lump sum.

Politicians and mortgage experts said it is the latest evidence of how banks are tightening their lending criteria amid the recession despite billions of pounds in financial support from the taxpayer.

Grant Shapps, shadow housing minister, said: “Despite years of hearing Gordon Brown boast about how he had ended the housing boom and bust, people are now having to work longer and retire later on less money. This latest news will certainly send chills down the spines of thousands of hardworking people who had previously thought that they might be able to retire in comfort.

The majority of lenders cap lending to borrowers up to the ages of between 65 and 75 years old, having never previously had such limits in place.

Mortgage brokers said they are potential options available to those whose mortgage deal comes to an end in retirement. These include approaching lenders for an extension to the mortgage term, remortgaging or getting children to guarantor their elderly parents’ mortgages.

With the number of home owners falling behind with their mortgage payments reaching a 12 year high, lenders have been told by the Government to use repossession as a last resort.

This reduced demand is combined with an increase in the [...]]]> The property boom that home owners have enjoyed during the past year has ended as the latest housing survey shows home buyers retreating over concerns about the economy.
The Royal Institution of Chartered Surveyors said “increased uncertainty” about the economic outlook was making home buyers more cautious.

This reduced demand is combined with an increase in the supply of properties following the abolition of Home Information Packs.

It is a reversal of the fortunes of the housing market which saw prices rise sharply in many areas during the past year due to a lack of suitable properties.

RICS said eight per cent more estate agents reported a fall rather than a rise in house prices in July, the lowest reading in more than a year.

It is in sharp contrast to last month when 8 per cent more surveyors reporting rising rather than falling prices.

At the same time the number of new sellers increased with 33 per cent more estate agents seeing a rise rather than a fall in properties to their books, up 28 per cent from June and the highest level since before the beginning of the credit crisis in May 2007.

Rics said this was because more homes were being put up for sale, while inquiries from potential new buyers [...]]]> House prices are starting to fall, the latest survey by the Royal Institution of Chartered Surveyors (Rics) has said.
It is the first time since July last year that its monthly survey has detected a downturn in prices.

Rics said this was because more homes were being put up for sale, while inquiries from potential new buyers had fallen for the second month in a row.

Buyers were finding it hard to get a mortgage, while fear of unemployment was putting off others, Rics added.

“The fall in the Rics house price measure is broadly consistent with most other recent data that has been released,” said Rics spokesman Ian Perry.

“Significantly, the forward looking price expectations numbers suggest that this softer trend will continue through the second half of the year.

“However, agents are still generally optimistic about sales activity, which should benefit from more realistic pricing of properties,” he added.

The survey was based on questions to only 242 surveyors around the UK, who also work as estate agents, but the Rics report has traditionally had its finger on the pulse of the property market.

While 64% of those surveyed had not seen any change in local house prices during the preceding three months, those who had seen rises – 11% – were outnumbered by the 25% who had seen prices drop.

Recent surveys from both the Halifax and the Nationwide have also shown that the upturn in house prices, which started in the spring of 2009, has been cooling off.

That rise had been driven largely by a shortage of homes being put up for sale, but now the balance of supply and demand has reversed.

Rics said its members expect the downward pressure on prices to continue.

“Expectations for house price increases have also turned negative, with 28% more surveyors expecting prices to fall over the coming months,” Rics said.

The highest average price reductions were in [...]]]> A third of all properties for sale have seen their prices reduced amid an uncertain outlook for the housing market, a new survey suggests.
The properties have seen their values cut at least once since they were first listed on the market, according to the survey by property website Zoopla.

The highest average price reductions were in Rotherham, Manchester and Barnsley, where average asking prices were discounted by 7.1 per cent.

It is the equivalent of a £9,500 drop in asking prices in Rotherham, a £11,400 drop in Manchester and a £9,000 drop in Barnsley.

Percentage price reductions have been smaller in the south of England, with average asking prices in Chelmsford and Brighton both having been reduced by 5.1 per cent, or £18,800 and £19,900 respectively.

Nicholas Leeming, commercial director of Zoopla.co.uk, said, “Sellers across the country are certainly feeling the heat this summer as the recovery has slowed and the market direction is uncertain.

“More and more sellers are cautiously reducing asking prices in a bid to attract buyers and lock in the house price gains of the past 16 months. But Britain is not one uniform housing market and smaller reductions are clearly evident in some locations in the south of England where the outlook for employment and economic growth is brighter.

“In a buyers’ market, astute house-hunters will be on the lookout for properties with the biggest reductions in the hope of picking up a bargain.”

The annual house price inflation rate fell from 6.3% to 4.9%, with the average property [...]]]> UK house prices have continued to rise in July according to the latest report from the Halifax.Prices rose 0.6% in July, the Halifax said, reversing a fall seen in June, but values have changed little since the start of the year.

The annual house price inflation rate fell from 6.3% to 4.9%, with the average property now costing £167,425.

Halifax said that the mixed pattern of prices rises and falls so far this year was “consistent with a slowing market”.

It reiterated its view that prices would be “broadly unchanged” over 2010 as a whole.

“The increase in the number of properties for sale over the past few months, boosted by the recent abolition of home information packs, has relieved much of the pressure that was driving up prices in 2009,” said Martin Ellis of the Halifax.

After the banking crisis of 2007 and 2008 prices started rising briskly again in the spring of last year, but have been easing off for much of this year.

According to the Halifax, the average house price hit a recent peak in January at just over £169,000 but after falling back slightly since then they are now no higher than they were last November.

The Halifax’s survey is showing a very similar trend to that of its rival lender the Nationwide.

Although the building society was less certain about the prospects for house prices this year, when it published its own report last week, its picture for the year so far is very similar to that of the Halifax.

“Significantly, all the key forward looking indicators compiled by Rics [...]]]> The Royal Institution of Chartered Surveyors (RICS) has said that it expects prices to start falling in the second half of this year, as sellers started to outnumber buyers.
And Simon Rubinsohn, chief economist of Rics, reiterated that the institution still thought prices were likely to drop.

“Significantly, all the key forward looking indicators compiled by Rics suggest the headline price indices will continue to slip back during the second half of the year,” he said.

“Within this overall trend, however, there will be significant regional divergences – with London, the South East of England and Scotland showing the greatest level of resilience.”

The mortgage market has experienced a subdued summer with a drop in approvals in June, figures from the Bank of England show.

The number of mortgages approved for house purchases during the month stood at 47,643, down slightly on the previous month and below the average of the past six months.

It was also 6% lower than the number during the same month a year earlier, which was the first year-on-year fall since April last year.

“It is likely to remain [negative] in future months as comparison is made with a rather stronger market towards the end of last year,” said Paul Samter, of the Council of Mortgage Lenders (CML).

Remortgaging was also slack owing to current homeowners enjoying low mortgage rates and tighter lending requirements constraining others, he said.

The Bank of England figures also showed that repayments of unsecured debts outstripped new borrowing in June as consumers paid back £98m more than they borrowed on credit cards, personal loans and overdrafts.

The price of the average home is now £169,347, almost the same as [...]]]> UK house prices inflation in the UK continued to ease off in July, the Nationwide building society has said.
Its latest monthly survey shows that prices fell by 0.5% this month, taking the annual rate of house price inflation down from 8.7% to 6.6%.

The price of the average home is now £169,347, almost the same as it was in July 2008.

The Nationwide said price rises were easing off as more homes were being put up for sale.

“At the moment, the market is clearly easing relative to the very tight supply conditions that characterised it since early 2009,” said the society’s chief economist Martin Gahbauer.

“A combination of restrictive credit conditions and uncertainty about the future economic outlook continues to limit the pool of buyers to those with relatively large financial resources,” he added.

It will take several more months to establish… whether a period of downward trending prices may be in store”

Buyers typically still have to put down a deposit of at least 25% to secure a mortgage as banks and building societies continue to ration their mortgage lending in the wake of the credit crunch and banking crisis of 2007 and 2008.

The Nationwide pointed out that the number of completed home sales was still running at about half the level recorded before the credit crunch started.

Since the spring of 2009 prices had been pushed higher again, mainly by a shortage of homes coming onto the market for sale.

However, the Nationwide said it was unsure about where prices were heading.

“It will take several more months to establish whether house prices are now simply oscillating around a flat price trend or whether a period of downward trending prices may be in store,” Mr Gahbauer said.