Diary of a Property Investor

UK Mortgage Approvals Rise Further: BoE

The numbers of loan approvals for house purchase in the UK stood at 50,123 in July, up from 47,891 in June, the Bank of England reported Tuesday. Economists were expecting a level of 50,100 for July.

Loans approved for remortgaging totaled 35,206 in July compared to 35,137 in June. Meanwhile, the number of loans approved for other purposes came in at 27,278, which was lower than in June and below the previous six-month average.

Source: RTTNews

UK mortgage agreements rise to 17 month high

The number of UK mortgage arrangements confirmed in July this year rose to 38,181 which is a significant increase from June which saw 35,564 mortgage arrangements agreed. This is the highest monthly mortgage count since February 2008 and while the figures alone are very encouraging it was interesting to note that the average loan size has also increased by 1% to just under £140,000. So what next?

When you consider the increase in mortgage arrangements, positive comments by UK housebuilders and a feeling that the UK banking industry is ready to pump more mortgage liquidity into the system it seems that the UK housebuilding sector has turned the corner. However, it is surprising to see that over the last few weeks there have been a number of downbeat statements on the UK housing sector with some claiming a short-term rally will run out of steam and subsequently prices will fall further in 2010. Even though there is a feeling that the UK sector has bottomed out there is still concern as to why so many people are still remaining so negative for 2010.

Until the vast majority of analysts, mortgage lenders and homebuyers are singing from the same hymn sheet there will be volatility in the sector and there will be changing opinions over the coming weeks and months.

Source: FinancialAdvice.co.uk

UK mortgage approvals up almost a quarter

The volume of mortgage applications approved for a residential property purchase, including that of new home builds, leapt by 23% in June, compared to the preceding month, according to the Council of Mortgage Lenders (CML).

CML data shows that this is the fifth successive monthly rise in mortgage approvals and the highest level achieved for a year.

There was also a sharp increase in the number of first-time buyers, who are seen as a key to the revival of the housing market, getting on to the property ladder. Many first time buyers are looking to take advantage of the recent market slump and buy cheap property, or a shared ownership home, which is becoming ever more popular.

No fewer than 17,200 mortgages were issued to people buying their first abode, up 26% compared to May.

CML’s research acts as yet another sign that the UK property market is now on the road to recovery, owed partly to a shortage of residential properties for sale, further stressing the need for the construction of more new home developments.

Additional research by the Department of Communities and Local Government shows that the decline in property values slowed to 10.7% year-on-year in June, an improvement on the 12.7% annual fall recorded in May.

The medium price of a home in Britain stood at £191,423 in June. 

Source: What House?

UK Lenders Introduce Higher LTV Mortgage Deals

British mortgage brokers say that they are starting to see lenders broadening the range of high LTV deals, which fact can be explained by the release of new data on house prices. Better mortgage deals mean that first-time buyers will have higher chances on climbing the property ladder.

One of the largest British lenders, the Lloyds TSB banks, which controls almost 30% of the UKmortgage market and which is owned by the Lloyds Banking Group, is expected to announce the launch of new deals for buyers with minimum deposits. The deals will expectedly include several 3-year fixed mortgage offers.

Another lender that made a concession for first-time buyers is the Coventry Building Society, which has cut its interest rate for buyers with a 15% deposit to 4.99%, 1% down from 5.99%. However, FTBs should realize that the previous rate was fixed for 5 years, while the new one is variable. The good news is that the newly launched mortgage offer comes with a fee of mere £499 and does not have any early repayment charges, which means that borrowers can easily switch to fixed deals in case interest rates start to rise.

Mortgage brokers warmly welcome the moves, undertaken by some of the British lenders. They add that the particular mortgage deal, launched by the Coventry Building Society, will be highly attractive to UK first-time buyers, who have been having hard time getting on a property ladder lately.

On the other hand, a wider range of high LTV mortgage deals does not mean that the banks have loosened their lending criteria. In fact, borrowers with low deposits wishing to qualify for a newly launched mortgage deal have to have a spotless credit history.

Let us remind that British lenders explain the introduction of new high LTV mortgage deals by the house price data, recently released by RICS and other organizations.

Although the data suggests that property prices are starting to stabilize, some of the British lenders, such as Abbey, Woolwich, Yorkshire and Chelsea building societies, chose to increase their interest rates in order to manage the increased inflow of mortgage applications.

Source: E1 BTL Finance

U.K. June Mortgage Approvals Rise to 14-Month High

U.K. mortgage approvals climbed to a 14-month high in June, adding to signs the housing market is recovering as the recession eases and banks become more willing to lend.

Banks granted 47,584 home loans, compared with 44,169 in May, the Bank of England said today in London. Economists predicted 47,000, according to the median of 21 forecasts in a Bloomberg News survey House prices held their value for a third month in July, according to a survey of real-estate agents by Hometrack Ltd. Central bank policy maker Andrew Sentance said last week the bank may consider a pause in its 125 billion-pound ($207 billion) bond-purchase plan if economic forecasts published next month point to a recovery.

“We’re expecting to see mortgage approvals rise as the banking crisis begins to ameliorate,” said George Buckley, an economist at Deutsche Bank AG in London. “The bank will be mildly encouraged by these figures. I don’t see a change in the bond purchases or in rates.”

The pound was little changed after the report at $1.6361 as of 10:30 a.m. in London.

Net lending secured on dwellings rose to 343 million pounds from 331 million pounds in May, while net lending to consumers fell to 71 million pounds from 153 million pounds. Credit card lending rose by 167 million pounds.

Gross mortgage lending was 1.98 billion pounds in June, the highest level this year, the Building Societies Association said today in a separate report. That’s 30 percent more than in May and 40 percent lower than a year earlier.

Stable House Prices

The average house price in England and Wales held at 155,600 pounds this month, Hometrack Ltd., a London-based property research company, said July 27. The reading is still down an annual 7.7 percent.

Sentance said last week there may be “some evidence of positive growth in the second half of the year,” and the bank may shift to a “watching” stance next month on their plan to ease credit strains in the economy.

The bank kept the key interest rate at a record low of 0.5 percent this month and voted for no change in the asset-purchase arrangements. Policy makers make their next decision on the key rate and so-called quantitative easing on Aug. 6.

M4, the broadest measure of U.K. money supply, fell 0.2 percent in June and was 13.8 percent higher than a year earlier. The annual rate of increase was revised from a previous estimate of 14.2 percent.

The bank also reported a separate measure of M4 that excludes financial companies that specialize in intermediating between banks, such as bank holding companies and non-bank credit grantors.

On this measure, money supply shrank 0.6 percent in June compared with an expansion of 0.1 percent in May. For the three months through June, the growth rate fell to 2.4 percent from 4.4 percent in the period through May.

Source: Blomberg.com

U.K. Mortgage Approvals Highest In More Than A Year

The number of mortgage approvals for house purchase in the U.K. rose to their highest level in more than a year in June, data released by the Bank of England showed Wednesday.

The number of loans approved for house purchase totaled 47,584 in June, the highest since April 2008, larger than May's 44,169 and 47,000 expected by economists.

Meanwhile, the number of loans approved for other purposes stood at 29,509, which was also higher than in May.

Further, the central bank said total net lending to individuals rose GBP 0.4 billion compared to GBP 0.5 billion increase in May. The twelve-month growth rate continued to fall, down by 0.2 percentage points to 1.2% in June.

Within the total, the increase in net lending secured on dwellings was GBP 0.3 billion, unchanged from May. On an annual basis, lending secured on dwellings showed a 1.1% growth versus 1.3% in the prior month.

Consumer credit increased by a net GBP 0.1 billion in June, in line with the previous six-month average. Credit card lending increased by a net GBP 0.2 billion and other loans and advances fell GBP 0.1 billion.

Also on Wednesday, data released by the Building Societies Association or BSA showed that the value of mortgage approvals totaled GBP 1.81 billion in June, down from GBP 2.72 billion in last year. In May, building societies approved mortgages worth GBP 1.60 billion.

Brian Morris, Head of Savings Policy at the BSA, said, "Mortgage approvals show signs of stabilizing as they reached a year high of GBP 1.8 billion, but are more than 30% down on this time last year."

The BSA's gross lending was GBP 1.97 billion in June compared to GBP 3.25 billion last year. That was the highest level seen this year, and up 30% on May.

Last week, the British Bankers' Association reported that the number of mortgage approvals, on a seasonally adjusted basis, rose to 35,235 in June from 31,919 in May. Approvals increased for the third straight month and the June number is the highest since March 2008.

Another report from the BoE showed that M4 money supply increased 13.8% year-over-year in June, slower than the 16.3% growth in the previous month. On a monthly basis, it fell 0.2%.

The Bank of England cut interest rates to a record low and initiated a GBP 125 billion asset purchase programme to protect the economy from its worst crisis. The central bank is widely expected to keep the bank rate unchanged at 0.5% on August 6, but the focus of the meeting would be whether policy makers increase the size of the programme adding GBP 25 billion.

Source: RTT News

Bank of China targets UK borrowers

Borrowers looking for a new mortgage deal can now add Bank of China to their list of potential lenders, as the Chinese state-owned bank is targeting the UK with competitive loan rates.

Bank of China has been providing mortgages to the Chinese community in the UK but has recently broadened the availability of its loans. It is now offering two tracker deals to a wider pool of UK borrowers.

The rates – of 2.5 per cent over the Bank of England base rate for residential borrowers and 3.5 per cent over base for buy-to-let customers for the lifetime of the loan – are among the best on the market and undercut many UK lenders.

HSBC and Woolwich have similar lifetime trackers but a number of shorter-term trackers from lenders such as Abbey and Lloyds charge considerably higher rates.

Borrowers need a minimum deposit of 25 per cent and must pass tough credit checks, as well as a personal interview at a Bank of China branch. The bank has five branches across the UK’s major cities.

Mortgage brokers said the entry of one of the world’s biggest banks would bring a much-needed boost to the UK market. Mortgages are in scant supply as many of the UK’s banks still have limited access to finance and are focused on repairing their balance sheets rather than increasing new lending. Many of the best mortgage deals have disappeared in recent weeks as lenders have increased rates to ease strong demand.

“There are lots of reasons why banks and building societies aren’t lending at the volumes they would like,” said Mark Harris, managing director of Savills Private Finance, the broker. “If some of the slack can be taken up by new foreign entrants, then that is good for the consumer.”

Brokers expect more foreign banks and other smaller lenders to enter the mortgage market over the next few years, which could put pressure on UK banks to launch cheaper deals.

Low interest rates make margins on loans attractive and demand from borrowers is far exceeding supply. Overseas banks such as Kleinwort Benson, Investec and Standard Chartered already do some mortgage lending in the UK.

Source: FT.com

UK Mortgage Approvals Rose to 15 Month High in June, BBA says

By Jennifer Ryan

July 23 (Bloomberg) -- U.K. mortgage approvals rose in June to the highest level since March 2008 as the property slump showed sign of easing and banks became more willing to lend.

Loan approvals for home purchases increased to 35,235 from 31,919 in May, the British Bankers’ Association said today in a statement. The level has almost doubled in seven months.

“Numbers of new home loans approved by the high street banks are recovering from the very low level last November, and so far this year gross mortgage lending has topped 50 billion pounds,” David Dooks, statistics director at the BBA, said in the statement.

Bank of England Deputy Governor Charles Bean said yesterday the supply of credit is “starting to free up” after the bank started creating money to buy bonds and stoke lending. Policy makers unanimously decided this month to hold their money- printing plan at 125 billion pounds ($207 billion), saying risks to the economy had probably diminished.

U.K. property prices are also showing signs of recovery, with home sellers raising asking prices this month, Rightmove Plc, the nation’s biggest residential property Web site, said July 20. The average cost of a home in England and Wales rose 0.6 percent to 227,864 pounds after falling 0.4 percent in June.

To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net

Source: Bloomberg  

UK Mortgage Lending May Gain on Approvals, BOE Says (Update 1)

July 20 (Bloomberg) -- U.K. mortgage approvals by the nation’s six biggest banks increased in June in a sign real- estate lending may strengthen, the Bank of England said.

The number of loans granted by the institutions rose to 51,100, the highest since records began in December, from 45,000 in May, according to a sample from the central bank’s lending panel released today in London. Lending for homebuyers climbed to 4.7 billion pounds ($7.8 billion) from 4.3 billion pounds the previous month.

“The major U.K. lenders reported a further rise in approval for house purchase in June, suggesting that mortgage lending for house purchase may continue to strengthen in coming months,” the bank said in the report.

British home sellers raised asking prices this month to meet increased demand from buyers, Rightmove Plc said today. The housing market is showing signs of recovery from the worst economic contraction in a generation after officials rescued banks and started printing money.

Gross mortgage lending in the U.K. rose 17 percent in June from the previous month, the Council of Mortgage Lenders said today in a separate report. Lending against homes was still 48 percent lower than a year ago, the CML said.

The Bank of England’s sample covers data from Banco Santander, Barclays Plc, HSBC Holdings Plc, Lloyds Banking Group Plc, Nationwide Building Society and Royal Bank of Scotland Group Plc. Together they accounted for about 70 percent of mortgage lending at the end of 2008.

Loan Criteria

The sample suggests that banks may also loosen mortgage criteria in coming months to allow higher loan-to-value ratios and smaller deposits, the central bank said.

“Some major U.K. lenders have reported that signs of stabilization in housing market activity and prices, and the margins prevailing on higher LTV products, have slightly increased their appetite to lend at higher LTVs,” the central bank said.

The average cost of a home rose 0.6 percent to 227,864 pounds after falling 0.4 percent in June, Rightmove, the operator of the U.K.’s biggest residential property Web site, said today. Prices in London had the first annual gain of the year so far.

The Bank of England’s data showed the banks are also charging more for their home loans. The average rate on a 2-year fixed-rate mortgage with a 25 percent deposit rose to 4.47 percent in June from 3.98 percent in May, the report said.

None of the major lenders have any plans to expand unsecured consumer credit, nor do they see any “significant signs” of higher demand, the central bank said.

The bank said that for corporate lending, “funds raised by businesses from banks and capital markets remained weak.”

Nevertheless, “a stabilization in the economic outlook, as well as slightly more plentiful and cheaper funding, was expected to help them make credit more available over the next three months,” the bank said.

To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net

Source: Bloomberg

Societies renew faith in 90% mortgages

By Sharlene Goff

Published: July 4 2009 03:00 | Last updated: July 4 2009 03:00

Building societies are showing a renewed appetite to offer loans for 90 per cent of a property's value as competition begins to creep back into the market for mortgage borrowers with small deposits.

The number of mortgages available to borrowers with a 10-per-cent deposit has risen by 21 per cent since the start of June, according to Moneyfacts.co.uk, the product comparison website.

Societies including Britannia, Cambridge, Earl Shilton, Saffron and Leek United have launched high loan-to-value mortgages in the past month, helping to improve the purchasing power of first-time buyers.

But there is no sign of lenders venturing back into the riskier 100 per cent mortgage market, which rapidly dried up when house prices started to fall. Banks are concerned that without an equity cushion there is still a considerable risk of borrowers falling into negative equity.

"Nobody is offering mortgages at 100 per cent, and while the number of 90 per cent deals are increasing this is from a very limited number," said Ray Boulger at John Charcol, the mortgage broker.

The mortgage rates on 90 per cent loan-to-value deals also remain high, with some lenders charging more than 7 per cent.

Cash-poor buyers are, however, being offered help from other, less conventional sources.

Property developer Places for People is providing its own mortgages to borrowers who do not have a cash deposit. The loans, funded by the company itself, are available for homes in Milton Keynes. The properties are being sold by Knight Frank and range from £145,000 flats to three-bedroom homes costing about £400,000.

Buyers will be able to borrow up to 100 per cent of the property value on a fixed or tracker rate.

The initial two-year fixed rate is 5.99 per cent, which mortgage brokers said was good value compared with other high loan-to-value deals. When this expires borrowers revert to a more expensive tracker rate.

Miriam Morris, the development marketing director at Places for People, said that the group was prepared to take the risk of lending at 100 per cent loan-to-value as it was confident the property prices would increase.

The developer is also offering to buy back the properties after three years for the original price if the value has fallen below the purchase price.

Borrowers applying for a 100-per-cent mortgage have to pass stringent credit checks, Mr Morris said.

Mortgage brokers said that if the developer had not offered its own mortgages it may have struggled to offload the properties, as buyers may not have had sufficient cash savings to meet banks' requirements.

Source: The Financial Times Limited 2009