house prices a fairly steady market
The housing market is awash with financial statistics which can be hard to keep up with. Mortgage Introducer takes a look at the Acadametrics index for February
by
David Copland, chief executive of Pink
Gross mortgage lending for the first two months of the year projects a run rate of £115bn - well short of most financial commentators’ predictions of a £135bn market in 2011. But application figures suggest that activity in February is well up on January, which should be reflected in the market and result in better months ahead for all of us. Remortgages are becoming more popular with 2-year to 5-year fixes making up the bulk of the demand as most people are gearing themselves up for a rate increase with inflation now running at 4.4%.
Events in Japan and the Middle East appear to have delayed the expected interest rate rise in May and it will be interesting to see if rates in Europe are also delayed despite the European Central Bank’s chief president, Jean- Claude Trichet’s comments earlier in March indicating a rate increase was likely in April.
The delay may see an easing of swap rates which could prompt increasing remortgage activity as consumers start locking into medium to long-term fixed rates. If demand remains low lenders will be tweaking their scorecards or raising
50 mortgage introducer APRIL 2011
loan to values to meet their lending targets. There have been a few 90% and 95% LTV mortgages launched in the last month or so and already there are more high LTV mortgages available than at any time in the past two years.
RemoRtgage Rise When interest rates do go up there will be a spate of remortgage activity again but this will be to the detriment of first-time buyers and those applicants who need lender criteria stretched a little in order to get a mortgage.
My feeling is that with the increase
in remortgage activity groups such as first-time buyers or those who need more generous criteria will be neglected by lenders in favour of those who wish to remortgage on low LTVs with good payment history.
Rental maRket on the up Buy-to-let will also continue to grow in popularity and will do well this year as the asset rich purchase more assets. Meanwhile those without assets still find themselves unable to embrace home ownership either through the inability to find the deposits or meet lenders’ scorecard hurdles. Of course the number of people unable to get on the housing market will fuel the rental market and we have already experienced rent rises of by nearly 4% in the last year and almost double that in London, where many house prices are prohibitively expensive
for all but the wealthy. It is hard to see how this is going to change as the average age of first-time buyers keeps going up.
As students leave university with enormous loans they will increasingly struggle to raise the 25% needed for a deposit to get on the housing ladder without the help of parents or other equity-rich family members.
BRokeRs suRviving The broker market seems more positive with brokers having cut their overheads down as low as they can. Those who have survived the last few years are more optimistic about the future. While there are fewer transactions in the market there are also fewer advisers so there is more business for each adviser to do. Our most successful brokers have changed their focus in the last year or two so that mortgages are not their only source of business. Rather mortgages are becoming a reason to speak to clients with increasing attention paid to the protection and general insurance sales that go with it. Indeed, some advisers are now selling several insurance products with every mortgage.
BRokeRs must up game It continues to be challenging as lenders change their affordability criteria and scorecards on a regular basis, either through interpretation of future changes from the Mortgage Market Review or
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