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Brian Murphy is head of lending at Mortgage Advice Bureau
P
urchase and remortgage activity showed a notable increase last month. The most recent
National Mortgage Index from Mortgage Advice Bureau found applications for both purchase and remortgage borrowing increased in July, recovering by 14.6 per cent from June – which was the slowest month to date in 2012. Despite the rollercoaster year, the year-to-date activity remains ahead of the same period in 2011 by 4.8 per cent. Throughout 2012 average
loan-to-value (LTV) on purchase applications has fallen steadily but this sequence came to an end in July. The average LTV increased to 70.4 per cent from to 68.2 per cent in June. Consequently, there was also a reversal in the size of the average deposits on applications, decreasing by £680 in the past month. However, the average size of deposits recorded in July still represents an increase of 19 per cent since January, and is up 16.6 per cent on the figure from July 2011. Average mortgage rates
showed more movement in July with average two and five year fixed rate mortgages falling, while three-year fixed rates showed a slight increase. The changes came about as lenders entered into a bit of a price war in anticipation of the introduction of the Bank of England’s Funding for Lending scheme at the beginning of August, which will make cheaper credit readily available if lenders can demonstrate they are actually lending.
HSBC led the way, cutting rates
on its 60 per cent LTV product to below the psychologically important 3 per cent level.
www.thenegotiator.co.uk
Government’s ‘Funding for Lending’ scheme offers hope
Brian Murphy on increases, decreases and a little hope! Purchase - Regional Summary - July 12
£450,000 £400,000 £350,000 £300,000 £250,000 £200,000 £150,000 £100,000 £50,000 £0
Average Deposit - £ Purchase Average Loan - £
“Lower income first time buyers will be hoping the Bank of England scheme helps ease lending criteria.”
Purchase LTVs and Deposits - August 11 - July 12
100% 90% 80% 70% 60% 50% 40% 30% 20%
only experienced minimal change. Having said this, lower income first time buyers will be hoping the Bank of England scheme helps ease lending criteria as credit conditions remain tight. This is evidenced by the average income of borrowers making purchase applications which has continued to increase, rising 3.2 per cent since June. Year-on- year analysis shows the average income of borrowers is now 11 per cent greater than in July 2011. Regionally, activity remains
mixed. Greater London saw a pick up in the size of loans for purchase after a three month slide, increasing by 0.4 per cent to £279,534 in July from £278,304 in June. The rest of the UK saw a more varied picture with five other regions experiencing modest increases in purchase loan size and four seeing noticeable decreases. East Anglia reported the biggest increase up 12.3 per cent from June, while the North dropped 5.3 per cent over the same period, reinforcing the notion of the classic North/ South divide. The official launch of the Bank
Average Deposit - % Purchase Average LTV - %
Santander, RBS/Natwest and other high street brands then followed suit and also slashed rates on some products. Despite these fluctuations and
reversals in trends last month, there has been little significant
impact on affordability so far this year. Average annual income as a percentage of purchase price has remained fairly static throughout 2012, varying by just 1 per cent. Similarly, average annual income as a percentage of loan value has
of England’s ‘Funding for Lending’ scheme which provides banks with access to cheaper funds was on 1 August. Most of the major lenders have signalled their intention to access the new facility, which bodes well for mortgage borrowers and market conditions in August. The recent renewed competition on rates, as well as a slight increase in product availability will boost activity, although this period is traditionally slower than others as so many people are on holiday. A truer picture of the impact of the scheme should be seen in the months following. l
TheNegotiator l October 2012 l 19
North N East N West W Mids E Ang S East Mar-12 S West Wales Gr Lond National
Aug-11 Sep-11
Oct-11 Nov-11 Dec-11 Jan-11 Feb-11 Mar-12 Apr-12 May-12 Jun-12 Jul-12
0.714 0.718 0.697 0.716 0.698 0.72
0.718 0.705 0.698 0.684 0.682 0.704
0.286
0.282 0.303 0.284 0.302 0.28
0.282 0.295 0.302 0.316 0.318 0.296
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