News Review: Lending
LTV rates encouraging for wider market by
David Finlay, intermediary channel director, Barclays
data from the council of mortgage Lenders showed that gross mortgage lending declined to an estimated £9.8 billion in april, down 14% from the £11.4 billion in march and 5% from £10.3 billion in april 2010. the trade body pointed out
that a slight seasonal decline was expected as easter fell in april this year. coupled with the extra bank holiday for the royal wedding, it said that it is difficult to gauge underlying trends with any certainty. april was not only a
somewhat strange working month in terms of the abnormal amount of three day working weeks but it was also a time when the market had already conceded that activity would be suppressed due to it being such a fragmented month. as such it makes it difficult to gauge the resilience of house purchase demand but let’s hope that any restricted activity will spill over into may’s figures to help underline the market positivity which we believe is out there.
Remortgage the balance between house purchase and remortgage lending tipped towards remortgaging at the start of 2011, according to the cmL. remortgaging accounted for 37% of all lending in the quarter, an increase from 30% in the last quarter of 2010. Figures showed that
there were 33,900 loans for remortgage, worth £4.1 billion, advanced in march, up 16% by volume and 17% by value compared to February and up 17% by volume and 13% by value compared with march 2010. the remortgage market arguably continues to provide the backbone of the intermediary market but is still a market whose potential remains untapped by many. as such it’s key for intermediaries to take the initiative and, if they aren’t already doing so, proactively work their client banks to utilise the highly competitive deals currently on offer to help ensure their clients present and future financial well-being.
Housing market contrasting figures were reported for house prices in april with the latest LSL acadametrics House Price index suggesting that the average price of a home rose by 0.3% in april whilst the Halifax House Price index implied that april house values fell by 1.4% compared to march levels. the average house price is also said to have fallen by 0.2% in april to reach £165,609, according to nationwide’s monthly house price index. However, the latest uK Housing market survey from the royal institution of chartered Surveyors showed that the supply of property increased during april, as sellers returned to test the spring housing market. interestingly in its recent Prospects for the uK economy report, the national
10 mortgage introducer JUNE 2011
institute of economic and Social research commented that “real house prices will fall by 4.5% in 2011 and by an average of 1.5% per cent per annum in the subsequent four years as borrowing costs rise because of tighter monetary policy.” this appears to be a
somewhat negative view that i can’t say i wholly concur with but what is clear is that any predictions made regarding the housing market are difficult ones and the contrasting nature of many are what keep the industry so fascinating.
Arrears there was little change in the level of mortgage payment difficulties in the first quarter of 2011, according to data released by the cmL. the trade body reported that out of the 11.3 million outstanding
first-charge
mortgages in the uK at the end of march 2011, a total of 9,100 properties were taken into possession in the first quarter of 2011 (0.08% of all loans). this was 15% up from the 7,900 in the fourth quarter of 2010 (the fourth quarter of the year typically sees a lower number), but 10% lower than the same period a year ago, and equal to the average quarterly number of repossessions throughout 2010. the levels of arrears continues to be a problem but having said that it’s a positive to see that there has been a fall when compared to this time last year. there should be no resting on any laurels though as it’s vital we continue to work hard as
an industry to ensure that levels of arrears are kept to a minimum.
LTV levels the average loan to value ratio offered on mortgages reached a three-year high of 61% in april, according to
e.surv’s mortgage monitor. this is the seventh consecutive month the figure has risen and compares to an average LtV of 57% in april 2010 and of 60.8% in march 2011. and LtVs are higher at the lower end of the market, with the average LtV for properties under £125,000 being 68% in april 2011, compared to 64% in april 2010. additional research from
moneyfacts.co.uk showed the average rate for a 90% LtV mortgage has fallen below 6.00% for the first time since march 2008. at the time the research was released the average rate for a two-year fix at 90% LtV was 5.98%, 0.40% less than a year ago. While all LtV rates have fallen compared to this time last year, with 75% LtV deals dropping by 0.19% to 4.02%,
moneyfacts.co.uk reports that it is the 90% LtV tier that has seen the biggest fall. of course LtV levels
have been a major concern for borrowers and the intermediary market in recent years and whilst it is good to see these rising as lenders it’s also imperative to ensure that such rises remain at responsible levels. after all i’m sure that there is nobody working in the mortgage market who wishes to revisit the over-extended lending scenarios of the past.
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