Halifax dismisses fears of housing dip

The Halifax says it still expects annual price inflation of up to 3% despite biggest monthly drop since 2010

Britain’s biggest mortgage lender has dismissed fears that the UK housing market is heading for a crash despite posting news of the biggest monthly drop in prices since shortly after David Cameron became prime minister. Reporting on a month that traditionally marks the start of the spring house-buying season, Halifax said prices were down 3.1%, the steepest fall since September 2010.  The decline – which followed a 1.6% rise in March – meant the cost of the average home in the UK was cut by £7,140 to £220,962. Over the latest quarter – considered a better guide to the underlying trend – prices were 0.1% lower than in the previous three months.

Russell Galley, Halifax’s managing director, said demand for property had been weak in recent months. However, he still expected annual house price inflation to be between zero and 3% this year. In the three months to April, prices were up 2.2% on February to April 2017, down from 2.7% in the three months to March. Previous sustained falls in house prices have tended to occur only when rising unemployment forces people to sell their homes, but Galley said the UK jobs’ market remained strong. Unemployment is at its lowest level since 1975 and real wage growth has resumed.

Values dipped across the UK for the third quarter in a row, falling 0.1% between February and April, compared with declines of 0.1% and 0.7% in the two previous three-month periods, according to Halifax. The lender said both the quarterly and annual rates had fallen since reaching a peak last autumn. City analysts say the monthly Halifax figures tend to be more volatile than other surveys. House prices have been falling in London for some time, especially in wealthier areas, while values in areas outside the capital are still rising. Recent regional figures from Halifax showed the price of a typical house in London was £430,749 between January and March, the lowest since the end of 2015.

“More recently, activity and listings have picked up but we are finding the market still quite sensitive and only those prepared to negotiate hard are moving on.” Samuel Tombs, the chief UK economist at Pantheon Macroeconomics, said: “Looking ahead, consumers’ low confidence and modest rises in mortgage rates suggest that demand will continue to weaken. “Prices will fall rapidly, though, only when a large proportion of homeowners are forced to sell up. With unemployment and borrowing costs low and credit freely available, few people are being forced to sell their homes quickly. A period of broadly flat house prices, therefore, remains the most likely outcome.”

Apple Finance are happy to give free mortgage advice please give us a call on     01902 213201

The Mortgage Prisoners of Wolverhampton

Tens of thousands of British homeowners are trapped in expensive mortgages which they took out before the financial crisis because of new rules stopping them moving to better value loans.

There are 30,000 such “mortgage prisoners”, the Financial Conduct Authority (FCA) revealed, who, thanks to low interest rates, could each save thousands of pounds in repayments each year – if only they could remortgage.

The City watchdog is looking for ways to help these borrowers, who are all up to date on their mortgage payments, but it is difficult without undermining its own rules.

A key problem is that tougher affordability tests now apply to new loan applicants.

This means that someone who qualified for a loan in 2008 might not do so now, leaving them trapped in a position where they are paying for an expensive loan, but deemed unable to afford a new, cheaper loan.

Around 10,000 of these prisoners hold loans with active lenders, so the FCA is looking at a voluntary arrangement under which it asks their current current bank or building society to switch them on to a new deal.

However, the remaining 20,000 are with finance firms that do not issue new loans, such as Northern Rock or Bradford and Bingley, because their mortgage books were sold off to investors after the crisis.

The danger now is that those on standard variable rates will suffer when interest rates rise.

“There’s a mortgage ticking time bomb in the UK. Standard mortgage rates are soaring way above the UK base rates and if interest rates rise there is a huge risk of arrears and repossessions. This needs to be prevented,” said Martin Lewis from Money Saving Expert.

“The FCA is suggesting a possible voluntary agreement with the lenders – if that will work, great. If not, then it needs to force them.”

One group that is particularly affected is interest-only mortgage borrowers. Interest-only mortgages were popular before the financial crisis but banks typically ditched them afterwards because they relied on rising house values to keep borrowers from getting into negative equity.

As a result, these borrowers have struggled to switch onto new products as interest-only loans have been hard to find.

Bank of England data do, however, suggest things might be improving: there was a 45pc rise in the volume of interest-only lending in the third quarter of last year, compared with a year earlier. This indicates there are increasing options for this class of mortgage prisoner.

Borrowers are shopping around – but some still lose out

Overall, the mortgage market is working well, the FCA added, as most borrowers do shop around for a good deal, and then shop around again when any fixed-term offer comes to an end.

Those who don’t search the market for the best deal are together missing out on as much as £1bn of savings per year.

The FCA found 120,000 borrowers who are not ‘prisoners’ and would be able to get a better deal, but have still not switched away from old loans with non-lending finance companies.

In addition to these, around 800,000 other mortgage borrowers have moved off the original deal they signed up for but are still not on the cheapest loans available.

They could save around £1,000 each per year, the FCA estimates – meaning there are almost £1bn of annual savings available, if borrowers shopped around more actively.

The regulator is also looking at other ways to improve the mortgage market. It wants to make it easier for customers to compare mortgage products and to find out if they are eligible for them. It is also building a scorecard to rate mortgage brokers.

Rate rises are important to many in Wolverhampton and the West Midlands

A rate rise could have a substantial impact on both, potentially driving down the value of the home while increasing mortgage costs. The next UK interest rate announcement will be made on 10 May 2018.

The Bank of England (BoE) is trying to raise interest rates, but with the economy slowing and Brexit on the horizon the chances of rates rising sooner rather than later have fallen significantly.

The market is now pricing in a 17 per cent chance of a rate rise in May, having been at 100 per cent on 29 March 2018, after recent data pointed to a more buoyant economic outlook.

Continue reading “Rate rises are important to many in Wolverhampton and the West Midlands”

House price growth increases to 2.6% in the Wolverhampton area

Wolverhampton mortgage experts

Annual house price growth increased by 0.5% to 2.6% in April 2018, Nationwide’s House Price Index has revealed.

This represented an increase from 2.1% in the year to March, after prices increased by 0.2% from March to April.

Robert Gardner, Nationwide’s chief economist, said: “In recent years, we have seen a recovery in first time buyer transactions, which are now broadly in line with pre-crisis levels.

Principality to launch into Help to Buy in England

“The easing in credit availability, including schemes such as Help to Buy, have helped boost activity.

“Meanwhile, home mover activity has remained relatively subdued, in part due to the lack of stock on the market.

“Buy-to-let purchases have fallen as a share of total transactions since 2016, which reflects a softening in demand following tax changes and changes in underwriting standards.”

Craig Hall, new build manager at Legal & General Mortgage Club, said: “There is a good deal for first-time buyers to cheer about in the housing market right now.

“Property prices are now rising at much healthier levels, while mortgage rates are still competitive and support from various schemes such as Help to Buy remains on hand to help buyers onto the housing ladder.

“However, we cannot forget that there are buyers out there who are still finding it difficult to take their first step, and for these individuals speaking to a broker can make a big difference.

“Whether it’s raising awareness about schemes like shared ownership or providing access lenders that are willing to meet their needs, advisers can play a crucial role supporting borrowers to find their route to homeownership.”

But Jeff Knight, director of marketing at Foundation Home Loans, felt affordability was still a problem for first and second-time buyers.

He said: “Cities in the North of England are experiencing sustained price growth, adding to the already substantial challenge facing those looking to get one foot on the property ladder and pinning their hopes on a home outside the capital.

“Even with stamp duty cuts and low mortgage rates alleviating some of the pain points experienced by renters and buyers alike, affordability continues to remain a concern for the majority of those looking for their first or second home.”

And Jeremy Leaf, north London estate agent and a former RICS residential chairman, felt prices are rising due to a lack of supply.

He said: “The small increase in house price growth is probably more to do with a lack of supply rather than a burst of springtime activity.

“Nevertheless, a rise is more welcome than a fall and in line with other recent statistics shows that the market is continuing to follow a slow upward path, albeit without any fireworks. “Looking forward, we don’t expect a huge change but we are seeing an increase in valuations and listings which is likely to show itself in a little bit more activity over the coming months.”

 

Wolverhampton home buyers need more help to find cheaper mortgage deals.

Plans to make it easier for mortgage borrowers to shop around have been proposed by the City regulator, after it found nearly one in three people fail to find the cheapest deal.

The Financial Conduct Authority (FCA) said these people could have saved £550 per year with a lower-priced deal. It is also exploring ways to help “mortgage prisoners” – longstanding customers who are trapped in their existing deal – to switch.

Publishing its interim report into the mortgage market, the FCA said it had found that competition was working well for many people. But it also identified ways in which the market could work better.

Mortgage costs hit two-year high as lenders anticipate rise in UK base rate

Mortgage debt accounts for more than 80% of total UK household liabilities, so selecting a deal is one of the most important financial decisions consumers have to take, but it can be a difficult one to get right, the FCA said.

The regulator said that while there was little evidence that current arrangements between firms were leading to poor consumer outcomes, there was no easy way for people to be confident at an early stage of the mortgage products they qualify for.

This is a significant impediment to shopping around, and about 30% of customers fail to find the cheapest mortgage for them, it said. On average, these consumers were paying approximately £550 per year more over the introductory period of their mortgage compared with the cheaper product.

One approach could involve lenders making the necessary eligibility and other qualification criteria available to other market participants consistently at an earlier stage, the FCA suggested. This should help brokers and also create other opportunities for new online tools, it said.

The FCA also proposed making it easier for people to compare mortgage brokers, saying it intended to work with the broker sector to develop ways to compare deals.

The report said: “We found that on average a consumer’s choice of intermediary makes a difference to the eventual cost of their mortgage. In particular, we have observed links between more expensive mortgages and intermediaries that typically place business with fewer lenders. But there are few tools to help consumers choose an intermediary.”

Christopher Woolard, the FCA’s executive director of strategy and competition, said: “For many the market is working well with high levels of consumer engagement. However, we believe that things could work better with more innovative tools to help consumers.

“There are also a number of longstanding borrowers that have kept up to date with their mortgage repayments but are unable to get a new mortgage deal; we want to explore ways that we, and the industry, can help them.”

The FCA also outlined how “mortgage prisoners” could be better helped, many of whom took out interest-only deals before the financial crisis. Stricter lending practices since the crisis have made it harder for these customers to find a cheaper mortgage.

The regulator suggested there could be an industry-wide agreement for lenders to approve applications for a new mortgage deal from existing customers whose most recent mortgage was taken out before the financial crisis and who are up to date with their payments.

The FCA will consult on the findings and proposed remedies, with a final report due around the end of the year.

What is an interest-only mortgage, how to calculate your rates

Plans to make it easier for mortgage borrowers to shop around have been proposed by the City regulator, after it found nearly one in three people fail to find the cheapest deal.

The Financial Conduct Authority (FCA) said these people could have saved £550 per year with a lower-priced deal. It is also exploring ways to help “mortgage prisoners” – longstanding customers who are trapped in their existing deal – to switch.

Publishing its interim report into the mortgage market, the FCA said it had found that competition was working well for many people. But it also identified ways in which the market could work better.

Mortgage costs hit two-year high as lenders anticipate rise in UK base rate

Mortgage debt accounts for more than 80% of total UK household liabilities, so selecting a deal is one of the most important financial decisions consumers have to take, but it can be a difficult one to get right, the FCA said.

The regulator said that while there was little evidence that current arrangements between firms were leading to poor consumer outcomes, there was no easy way for people to be confident at an early stage of the mortgage products they qualify for.

This is a significant impediment to shopping around, and about 30% of customers fail to find the cheapest mortgage for them, it said. On average, these consumers were paying approximately £550 per year more over the introductory period of their mortgage compared with the cheaper product.

One approach could involve lenders making the necessary eligibility and other qualification criteria available to other market participants consistently at an earlier stage, the FCA suggested. This should help brokers and also create other opportunities for new online tools, it said.

The FCA also proposed making it easier for people to compare mortgage brokers, saying it intended to work with the broker sector to develop ways to compare deals.

The report said: “We found that on average a consumer’s choice of intermediary makes a difference to the eventual cost of their mortgage. In particular, we have observed links between more expensive mortgages and intermediaries that typically place business with fewer lenders. But there are few tools to help consumers choose an intermediary.”

Christopher Woolard, the FCA’s executive director of strategy and competition, said: “For many the market is working well with high levels of consumer engagement. However, we believe that things could work better with more innovative tools to help consumers.

“There are also a number of longstanding borrowers that have kept up to date with their mortgage repayments but are unable to get a new mortgage deal; we want to explore ways that we, and the industry, can help them.”

The FCA also outlined how “mortgage prisoners” could be better helped, many of whom took out interest-only deals before the financial crisis. Stricter lending practices since the crisis have made it harder for these customers to find a cheaper mortgage.

The regulator suggested there could be an industry-wide agreement for lenders to approve applications for a new mortgage deal from existing customers whose most recent mortgage was taken out before the financial crisis and who are up to date with their payments.

The FCA will consult on the findings and proposed remedies, with a final report due around the end of the year.

Around 1.67 million borrowers have interest-only mortgages and a significant number are at risk of losing their homes

But when you reach the end of an interest-only mortgage term – which is the deadline by which your loan must be repaid (normally between 25 and 30 years)– you will have to hand the property back to the bank unless you have another way of paying the lump sum.

What is an interest-only mortgage?

Around one in five borrowers, or 1.67 million people, have interest-only mortgages.

Tens of thousands of these loans will need to be repaid over the next few years.

The City watchdog warned earlier this year that a “significant number” of people are facing shortfalls and are “at risk of losing their homes.”

The Financial Conduct Authority (FCA) has referred to the crisis facing these borrowers as a “ticking time bomb”.

The problems are worst for borrowers who are approaching retirement and will not be allowed to remortgage due to their age and the fact their income will drop when they stop working.

Who are interest-only mortgages for?

Interest-only mortgages are only suitable for borrowers who have substantial savings or investments which they could use to pay back the loans when they fall due.

Borrowers opted for interest-only mortgages to keep their payments low but many didn’t understand the risks

But some people did not understand they would not own their homes at the end of the loan term

Other borrowers were sold investments by the bank alongside their home loans called “endowments”.

These were meant to grow over time so that borrowers could pay off their mortgages, but most of these investments failed to perform as well as expected leaving borrowers with a substantial shortfall.

In 2007 just before the global financial crisis, as many as a third of all new mortgages were sold on an interest-only basis.

This figure has fallen to just 4 per cent of all new mortgages today, after regulators raised concerns and lenders were forced to take a more cautious approach. opted for interest-only mortgages to keep their payments low and to allow them to borrow more.

What can you do if you have an interest-only mortgage?

If you have an interest-only mortgage it’s important to act as soon as possible and not to bury your head in the sand.

Speak to your mortgage lender and see if you can afford to switch to a repayment mortgage.

If you have enough time left before retirement, it may be possible to extend the term of your mortgage in order to give you more time to pay it back.

It is also worth speaking to a specialist independent mortgage broker like Apple Finance to see if you are able to switch to another lender with a lower rate.

This would allow you to put more of your monthly payments towards repaying the outstanding debt rather than just covering the interest costs.

A broker will also be able to help you to find lenders that have higher age limits.

Many lenders require borrower to pay back their mortgages by the time they reach 75, but others are more flexible so long as borrowers have enough pension income to keep up their payments.

David Hollingworth, of broker L&C, says: “It makes sense for those with interest only mortgages and no  repayment plan to consider their options sooner rather than later.

“Halifax, Leeds Building Society and Skipton will lend to borrowers up to age 80.

“Nationwide Building Society and Bath BS will consider lending to borrowers up to age 85.

If your house has grown substantially in value since you took out your mortgage, you may be able to sell and still have enough after paying back the bank to buy a smaller home.

Contact us at Apple Finance to discuss your options.