UK housing market activity sees 'gentle rise'
Mortgage experts are predicting a "gentle recovery" in activity in the UK housing market as new figures show lending rose slightly. Gross mortgage lending rose by 2% in May compared with April to £16.2bn, according to the Council of Mortgage Lenders (CML). This, and economic indicators, signalled a "limited" increase in activity in the coming months, it said. However, it pointed out that lending was 3% lower than in May last year. Mortgage rates are currently at very low levels as lenders aim to entice buyers to enter the market. But brokers say there remains a shortage of properties being put on the market.
Interest rate hike expected in "not too distant future"
One of the nine economists who decide where interest rates should be has told ITV News they will be going up in the "not too distant future" Kristen Forbes, member of the Monetary Policy Committee, says fast rising wages mean the Bank of England will soon have to move rates from the record low of 0.5%. Wages are part of the overall picture of the economy which the Bank of England is looking at. Pay had been stagnating for years but has gradually started to pick up pace in recent months. In fact, we learned that wages rose 2.7% in the three months to April compared with the same time a year ago. And that's quite an acceleration from March when wages were rising 2.3%. The last time wages were rising faster than this was in February 2009 - as the financial crisis was taking hold. So this begins to look like a recovery. Now with that, usually, comes the return of inflation. It's almost non-existent at the moment but Kristin Forbes has done research which finds inflation is likely to bounce back towards the 2% target from the end of this year. She rules out most of the factors which have held it back so far and says low inflation in other countries has little impact here. So rising inflation puts an interest rate hike on the cards.
Properties on the Market Lowest Level for Years, according to the Halifax.
This shortage of homes for sale, coupled with demand from buyers, has led to prices rising at a faster rate than wages, the lender said. Property prices rose by 8.6% over the year to the end of May, pushing the cost of the average home up to £196,067, its own lending data shows. Yet prices dipped by 0.1% in May compared with April. "The imbalance between supply and demand is likely to continue to push up house prices over the coming months," said Martin Ellis, housing economist at the Halifax.
The figures come the day after the Nationwide said that 38% of properties were sold to cash buyers. The Nationwide said that a "gradual downward trend" in annual price growth, which had begun last summer, had resumed.
UK has most expensive rents in Europe
Rents in Britain have dwarfed those across the rest of Europe as tenants in the UK pay almost double the amount of their continental counterparts, according to new research from the National Housing Federation.
UK rents averaged €902 (£750) per household per month, compared with the European average of €481 (£400). Even in countries where earnings are similar to those in Britain, such as Germany and Holland, rents are around 50% cheaper at €600 and €625 respectively. David Orr, chief executive of the National Housing Federation, said: that by European standards, the UK has persistently under-invested in housing. Between 1996 and 2011 in the UK, just 3% of national GDP was invested in housing, compared to 6% in Germany and 5% in France. "High rents are just one symptom of the housing crisis. We are not simply building enough due to under-investment and problems with the land market," he added.
Mortgage lending soars to post-crisis high
Mortgage borrowing jumped to a six-year high in May and average deposits also hit a new post-recession peak, new figures show. Deposits have grown in line with loan sizes over the last year as rising prices put more equity into buyers' pockets, according to the National Mortgage Index from Mortgage Advice Bureau. The index, compiled using data from over 600 brokers and 900 estate agents, showed that average loans reached new levels in May with the typical homebuyer applying for a loan of £167,842. That is 1% higher than April's previous post-recession marker of £166,141. Rising house prices are forcing consumers to take on bigger loans, but they are also putting up more of their own funds to climb the property ladder. The average house purchase deposit hit £72,302 last month .
FCA cracks down on debt management firms
Debt management firms are providing poor quality advice and encouraging vulnerable customers to buy unsuitable products, an FCA thematic review has found. The FCA reviewed how both fee-charging and free debt management firms are complying with the consumer credit rules. It found that while many firms had improved their practices in the last 12 months, the quality of advice provided by some fee-charging debt management firms was "unacceptably low". All debt management firms are required to have clear policies to identify and deal with vulnerable consumers. However, the FCA found that some firms failed to identify customers who had recently disclosed information such as significant medical problems or difficulties understanding financial or legal issues. The FCA found firms failing to adequately assess customers' financial circumstances before recommending a course of action; firms not making clear the type of service they provide and that free advice is available; and vulnerable customers encouraged to purchase products and services which were not suitable and impeded their ability to repay their debts. The review also uncovered inaccuracies in the information provided by advisers eager to sign people up to a debt management plan.
May 2015 figures for the high street banks
Richard Woolhouse, Chief Economist at the BBA, said: "Household borrowing remains robust and this is indicative of the wider recovery we're seeing in the economy. The increase in mortgage approvals this month is consistent with the trend we've seen since the start of the year. The numbers show that the property market remains buoyant after the general election. Fierce competition between lenders means that there are some great mortgage deals available from the high street banks. Personal borrowing by British families also seems to be strong - the uptake of personal loans and credit card borrowing is further proof of consumers' confidence". Key points: Mortgage approvals have been steadily improving over the past five months, and the number of house purchases in May is very similar to the underlying trend a year ago; Unsecured borrowing is growing at an annual rate of 5%. This is its highest rate since autumn 2010, reflecting strong consumer confidence; Net borrowing by businesses has been positive in three of the last five months.
Brokers' confidence in the mortgage market is rising, according to new research from Halifax
In a survey of over 300 brokers, in the first quarter 93% said they were confident about the outlook for the mortgage market, up from 88% in the fourth quarter of 2014. However, brokers' confidence is not at the level it was in Q1 2014, when 100% of those surveyed were confident about the outlook for the mortgage market. Around 93% were confident in the outlook of the intermediary sector, also up from 88% in Q4 2014, and 99% were confident about the prospects for their own firm. Halifax Intermediaries head Ian Wilson says: "The supply side environment is very good for brokers at the moment, with more lender competition, prompting better rates, greater product choice, and higher LTVs. Confidence in the market is now almost back at pre-MMR levels and the outlook for the rest of the year is positive. But as activity increased lenders are going to have to improve service levels to match."
CML estimates small May monthly rise in lending
Gross mortgage lending in May (not seasonally adjusted) showed little change on the previous month or on the same month last year, according to the Council of Mortgage Lenders. It rose by 2% on the previous month to an estimated £16.2 billion, but was 3% lower than the £16.8 billion of lending undertaken in May 2014. Forward indicators of lending, such as Bank of England data on approvals, suggest that the market can expect an upturn in lending over the coming months, reflecting the CML's assessment that a modest recovery is under way. CML economist Mohammad Jamei remarks in the CML's monthly market commentary "The economic environment is one that should support increased activity in the near term, coupled with low mortgage rates. But while we expect these factors to support activity, there is a limited upside, driven mainly by affordability constraints."
Interest rate rise getting closer, says Bank of England policymaker
The Bank of England is edging closer to a rise in interest rates for the first time since the financial crisis, as the UK economy remains on track to move back into inflation, according a a policymaker. Ian McCafferty, a member of the Bank's Monetary Policy Committee, said that some of the headwinds holding back the economy were "now starting to fade". This means that "we are approaching the time when monetary policy will need to begin its journey back to more 'normal' settings", he said. The MPC has held the Bank rate at a record low of 0.5% for more than six years, and a recent dip in technical deflation has led many central bank watchers to expect rates to remain static for even longer. Speaking in London, Mr McCafferty said that "the time of the extraordinary policy stance of recent years is gradually drawing to a close". Financial markets expect the MPC to have raised rates from their emergency lows by June of next year. The Bank expects inflation to head towards its 2% target, reaching 1.7% by the end of next year, as the effects of cheap oil, a strong pound and low food prices start to wear off.
Regulatory clampdown leads to fall in payday loans problems
Citizens Advice says it has witnessed a decline in the number of people with payday loan problems after a regulatory clampdown on lenders. The charity's figures show it dealt with 5,554 payday loan problems in the first three months of the year, a fall of 45% compared to the same period a year earlier. In April, the FCA took over responsibility for regulating payday lenders, while in January a cap on interest rates was introduced. Citizens Advice chief executive Gillian Guy says: "Irresponsible high-cost lenders are sentencing people to a life in debt. The drop in the number of problems reported to us about payday loans is good news for consumers and demonstrates the impact a strong stance against irresponsible lending can have on people's lives. It is important to remember that it is not just payday loans that have blighted people's finances. Other high cost lenders like guarantor or logbook loans are also causing havoc with people's finances. Following concerns raised by Citizens Advice the regulator and Government made a concerted effort to tackle payday lenders. Similar efforts are required for other high-cost credit companies. .
Buyers splash £7.7bn on stamp duty
Homebuyers in England and Wales have spent £7.7bn on stamp duty during the last year.
Figures compiled by Lloyds Bank showed the average homeowner has spent almost £10,000 on stamp duty in the last 16 years. In London, the average homeowner who first bought in 1999 and has moved up the ladder twice will have spent over £38,000 on stamp duty over this period. However, reforms to the tax introduced in December have seen the average bill for a "third stepper" drop by £2,500 (26%) in the last year. The total stamp duty revenue raised in England and Wales in the last 12 months now exceeds the £6.2bn receipts received in the year to March 2008, at the peak of the last housing boom. By comparison, in the 12 months to March 1999, less than £1bn was raised. Stamp duty accounts for 23% of all moving costs and Nitesh Patel, housing economist at Lloyds Bank, said the reforms to the market has been welcomed by homeowners. "The average homebuyer now pays almost £10,000 during their life as they make their way up the housing ladder," he said. "The welcome reforms to stamp duty announced by the Chancellor last December have helped to reduce stamp duty bills for the overwhelming majority of homebuyers and movers. However, as these figures show, the overall revenue raised with stamp duty actually increased by £1.5bn in the year to March 2015." The proportion of first-time buyers paying stamp duty has risen from 32% in May 1999 to 66% today, the bank added.
Govt. commits to PRS investment
The Government has reiterated its commitment to freeing up land in London to build more homes and renewed a promise to support development of the private rented sector. Speaking at the London Real Estate Forum this week housing minister Brandon Lewis said the Conservatives wanted to see "much more investment in London's private rented sector". He said: "The last thing we will do is deter good landlords and investors by increasing red tape and unnecessary regulations such as rent controls, which is what the opposition were promising before the election." He added that the Government will continue to invest in London's property market but acknowledged the "vital ingredient" to increasing housing supply is land. He said: "Land is clearly scarce in the capital, so we need to ensure new homes are built in the right places - especially on previously developed land and by using existing buildings where we can. We've also been working with the Mayor to create 20 new housing zones on brownfield land, with £200m from the Greater London Authority matched pound for pound with Government funding.
Mobile contracts influence affordability
Lenders are beginning to treat mobile phone contracts as debt, adversely affecting borrower affordability and potentially prompting customers to take pay as you go deals to avoid being declined for a mortgage, brokers claim. Some phone companies such as O2 with its Refresh Range, split customers' mobile phone bills into paying for airtime, seen as a variable expense, and the handset considered the equivalent of a hire purchase agreement. Allegedly the latter is treated as a loan by some lenders for affordability purposes and is therefore lowering borrowers' income available to repay their mortgage.
Second steppers face £128,000 price gap - Lloyds
Homeowners looking to move into their second property face a price gap of as much as £128,000, Lloyds Bank has suggested. More would-be buyers are now able to purchase their first home, but they face a problem when looking to move to a bigger property. These 'second steppers' typically need an extra £128,390 to fund the move to their preferred second home, typically a detached property. However, rapidly increasing house prices have seen many homeowners with more equity in their property. Lloyds said second steppers were living in the homes first-time buyers need to buy to keep the market moving. Increased demand meant one-in-three (33%) second steppers think it will be easier to sell their home this year, almost treble the figure recorded in 2012. Some 71% believe recent price increases have improved their overall financial position. Andy Hulme, Lloyds Bank mortgages director, said this section of the market was finally on the move. "Over the past few years second steppers have faced some tough challenges and many have been stuck in their first homes. We are now finally seeing a much needed boost to this vital part of the housing market, enabling more second steppers to make the next move on the housing ladder. Whilst challenges remain as second steppers try to bridge the gap to the next rung on the ladder, a steady rise in property values in 2015 should further ease the constraint on many and this will have a positive knock-on effect for the whole of the housing market."
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