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Commercial Property News
Residential Mortgage lending volume improves but costs and rates are rising
Mortgage lending showed a slight rebound in April, according to the Council of Mortgage Lenders (CML).
Some 50,700 loans to purchase homes were granted in April, a rise of 5,000 from the previous month and the highest level since December.
But the number was still 36% down compared with the same month in 2007 because of the credit crunch.
An average first-time buyer put down a deposit of 13% of a property's value which is the greatest percentage for more than three years and borrowed 3.3 times their income.
Michael Coogan, CML director general, said that the low levels of lending were set to continue.
"Monthly house purchase lending volumes continue to be lower than last year's levels and there will be a further weakening in coming months as recent approvals data has shown," he said.
The credit crunch has caused the banks to cut back on lending, especially to those they consider to be more of a risk.
The Bank of England made extra funds available recently to encourage banks to lend to each other.
But Mr Coogan said: "The squeeze on mortgage funding has led many lenders to tighten their lending criteria.
"While tighter criteria make it more difficult for some borrowers to obtain a mortgage, they also reduce risk in a slower housing market."
First-time buyers have felt the effects more than most, and the CML figures show that such borrowers have been asked to put down bigger deposits in recent years.
This trend has been reinforced by the UK's largest lender, the Halifax, which will increase the interest rate on its new three-year fixed-rate deal for customers who want to borrow between 75% and 90% of a property's value from 13 June.
However, customers who need to borrow less than 75% by putting down a bigger deposit are being offered cheaper deals on tracker and fixed-rate mortgages.
The number of loans granted to first-time buyers did rise slightly in April compared with March, up 4% to 18,500, but this was still 36% lower than a year ago, the CML said.
Gross mortgage lending in the UK rose 8% in April to £26.1bn, from £24.1bn in March, after two consecutive months of decline.
Remortgaging accounted for 42% of gross lending in April and has continued to be more buoyant than house purchases as large numbers of borrowers exit fixed-rate mortgages.
There were 83,000 loans for re-mortgage worth £11bn, up 14% in volume and 11% in value from March.
Homeowners have also increasingly turned to the security and certainty of fixed-rate mortgages. The proportion of borrowers taking out fixed-rate products increased to 59% in April, up from 54% in March and the largest proportion since December last year.
Homeseekers have also been urged to do the maths when looking for a new mortgage owing to the rise in application fees.
Price comparison website Moneyexpert.com said that in September 2006, only 22 fixed mortgage deals charged application fees of £750 or more.
But now that figure has risen to 323 fixed mortgages, a third of the total fixed mortgage market.
"Anyone looking to remortgage or to buy a property for the first time will need to recalculate their options if they haven't factored in fees," said director Sean Gardner.
"The days of fee-free mortgages are over and frankly getting anything under £1,000 is something of a coup."
At least 14 lenders have increased the cost of various fixed-rate deals during the past two days.
Among them have been big names such as the Halifax, RBS, and Birmingham Midshires, as well as several small building societies.
Mortgage brokers Chase De Vere said the average cost of a two-year deal, for a 90% loan, had now risen to 6.75%.
"Things have not been this busy with the withdrawal of deals for a month or so," said Aaron Strutt of Chase de Vere.
Figures published on Thursday by the Council of Mortgage Lenders (CML) showed that fixed-rate deals had become more popular than a couple of months ago.
In April they accounted for 59% of all new loans, the highest level seen this year.
The increased price of fixed-rate home loans since then has been driven by the increasing cost of borrowing the funds on the financial markets.
The CML warned that lenders needed not only to reflect their own higher borrowing costs, but to protect themselves in case house prices fell further.
Therefore some lenders have been putting up the cost of mortgages for borrowers who can put down only a small deposit.
But those people who want to borrow 75% or less of their property's value, and who are viewed as a much smaller risk to a lender, have, in some cases, seen the cost of new loans fall.
Yesterday, in a further example of lending criteria becoming tougher, the Abbey increased the cost of its remaining 95% mortgage, available for five years at 7.04%.
It now requires the £2,499 arrangement fee to be made up-front, rather than being added to the size of the loan.
The credit crunch, and the increasing difficulty of raising funds on the financial markets, has prompted many lenders to raise their savers rates to lure new customers.
The financial information service Moneyfacts said rates on fixed-rate bonds were now up to 7.1%, if customers were happy to put their money away for longer periods.
"Savers are one of the few groups to have benefited from the credit crunch, with rates at some of the highest levels that we have seen in recent years, " said Rachel Thrussell of Moneyfacts.
For the first time in years all of the top six most attractive places to invest, as ranked by Moneyfacts, are accounts offering interest rates of 7% or more, she added.
The current so called "best-buy rates" for more short term savings accounts now range from 6.2% for a no-notice account to 6.56% for an account with bonuses.
Some 50,700 loans to purchase homes were granted in April, a rise of 5,000 from the previous month and the highest level since December.
But the number was still 36% down compared with the same month in 2007 because of the credit crunch.
An average first-time buyer put down a deposit of 13% of a property's value which is the greatest percentage for more than three years and borrowed 3.3 times their income.
Michael Coogan, CML director general, said that the low levels of lending were set to continue.
"Monthly house purchase lending volumes continue to be lower than last year's levels and there will be a further weakening in coming months as recent approvals data has shown," he said.
The credit crunch has caused the banks to cut back on lending, especially to those they consider to be more of a risk.
The Bank of England made extra funds available recently to encourage banks to lend to each other.
But Mr Coogan said: "The squeeze on mortgage funding has led many lenders to tighten their lending criteria.
"While tighter criteria make it more difficult for some borrowers to obtain a mortgage, they also reduce risk in a slower housing market."
First-time buyers have felt the effects more than most, and the CML figures show that such borrowers have been asked to put down bigger deposits in recent years.
This trend has been reinforced by the UK's largest lender, the Halifax, which will increase the interest rate on its new three-year fixed-rate deal for customers who want to borrow between 75% and 90% of a property's value from 13 June.
However, customers who need to borrow less than 75% by putting down a bigger deposit are being offered cheaper deals on tracker and fixed-rate mortgages.
The number of loans granted to first-time buyers did rise slightly in April compared with March, up 4% to 18,500, but this was still 36% lower than a year ago, the CML said.
Gross mortgage lending in the UK rose 8% in April to £26.1bn, from £24.1bn in March, after two consecutive months of decline.
Remortgaging accounted for 42% of gross lending in April and has continued to be more buoyant than house purchases as large numbers of borrowers exit fixed-rate mortgages.
There were 83,000 loans for re-mortgage worth £11bn, up 14% in volume and 11% in value from March.
Homeowners have also increasingly turned to the security and certainty of fixed-rate mortgages. The proportion of borrowers taking out fixed-rate products increased to 59% in April, up from 54% in March and the largest proportion since December last year.
Homeseekers have also been urged to do the maths when looking for a new mortgage owing to the rise in application fees.
Price comparison website Moneyexpert.com said that in September 2006, only 22 fixed mortgage deals charged application fees of £750 or more.
But now that figure has risen to 323 fixed mortgages, a third of the total fixed mortgage market.
"Anyone looking to remortgage or to buy a property for the first time will need to recalculate their options if they haven't factored in fees," said director Sean Gardner.
"The days of fee-free mortgages are over and frankly getting anything under £1,000 is something of a coup."
At least 14 lenders have increased the cost of various fixed-rate deals during the past two days.
Among them have been big names such as the Halifax, RBS, and Birmingham Midshires, as well as several small building societies.
Mortgage brokers Chase De Vere said the average cost of a two-year deal, for a 90% loan, had now risen to 6.75%.
"Things have not been this busy with the withdrawal of deals for a month or so," said Aaron Strutt of Chase de Vere.
Figures published on Thursday by the Council of Mortgage Lenders (CML) showed that fixed-rate deals had become more popular than a couple of months ago.
In April they accounted for 59% of all new loans, the highest level seen this year.
The increased price of fixed-rate home loans since then has been driven by the increasing cost of borrowing the funds on the financial markets.
The CML warned that lenders needed not only to reflect their own higher borrowing costs, but to protect themselves in case house prices fell further.
Therefore some lenders have been putting up the cost of mortgages for borrowers who can put down only a small deposit.
But those people who want to borrow 75% or less of their property's value, and who are viewed as a much smaller risk to a lender, have, in some cases, seen the cost of new loans fall.
Yesterday, in a further example of lending criteria becoming tougher, the Abbey increased the cost of its remaining 95% mortgage, available for five years at 7.04%.
It now requires the £2,499 arrangement fee to be made up-front, rather than being added to the size of the loan.
The credit crunch, and the increasing difficulty of raising funds on the financial markets, has prompted many lenders to raise their savers rates to lure new customers.
The financial information service Moneyfacts said rates on fixed-rate bonds were now up to 7.1%, if customers were happy to put their money away for longer periods.
"Savers are one of the few groups to have benefited from the credit crunch, with rates at some of the highest levels that we have seen in recent years, " said Rachel Thrussell of Moneyfacts.
For the first time in years all of the top six most attractive places to invest, as ranked by Moneyfacts, are accounts offering interest rates of 7% or more, she added.
The current so called "best-buy rates" for more short term savings accounts now range from 6.2% for a no-notice account to 6.56% for an account with bonuses.
Fri, 13th Jun 2008