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Mortgage Market Review Already Causing Delays For Borrowers

Mortgage Market Review Already Causing Delays For Borrowers

Mortgage Market Review Already Causing Delays For Borrowers

Would be residential property buyers are dismayed about the change of the rules on residential mortgages, with strict lending criteria tightened following the introduction of the Mortgage Market Review (MMR).

Since 26th April 2014, mortgage lenders have been required to carry out much more detailed checks of a borrower’s financial situation to be sure that they can truly afford to purchase and continue to afford the property, both now and in the future.

The introduction of the MMR is supposed to help regulate the residential property purchase market and does not yet apply to buy to let mortgages, but that could happen in time.

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Gross mortgage lending declined to an estimated £10.2 Billion (GBP) in April 2012.

Mortgage lending fell by 19% from £12.6 Billion (GBP) in March 2012 but was 2% higher than the total of £10.0 Billion (GBP) in April 2011, according to the Council of Mortgage Lenders.

CML chief economist Bob Pannell comments:“Mortgage lending activity has been relatively buoyant in recent months, with stronger lending for house purchase underpinning the more upbeat lending picture. The underlying picture is likely to be a bit stronger than the April figure suggests, because some first-time buyers are likely to have brought forward their transactions to March 2012 to take advantage of the stamp duty concession that was coming to an end in March 2012. Eurozone developments remain highly uncertain and have the potential to undermine UK economic prospects and conditions in our housing and mortgage markets. The underlying picture is likely to be one of easing momentum in the housing market, but with potential for a sharper downwards correction on bad Eurozone news.”

Figures published last week show that the premium paid by buyers of new UK residential properties has widened dramatically following a 6.1% rise in prices of new-build properties over the last 12 months.

The website Smartnewhomes reported that the average price of a new build residential property was £228,909 in January 2012.

The UK Land Registry reported that the average residential property price in England and Wales for the same month was £161,545 – an annual drop of 1%.

The Land Registry’s survey is based on all residential property transactions, including new build homes, but excluding property repossessions and property sold at auctions.

It means that the premium paid by UK residential property buyers for new build properties is more than £67,364.

Institutional Investment is needed in UK Buy To Let Sector

Institutional Investment is needed in UK Buy To Let Sector

The Council of Mortgage Lenders, (CML), think the coalition Government’s Chancellor of the Exchequer, George Osborne should be doing more to encourage institutional investors to take a stake in Buy To Let property in the upcoming Budget.

The Council of Mortgage Lenders are the trade body for all the UK’s major bank and building society residential mortgage lenders.

The CML claim encouraging pension funds and corporate investors is a neglected policy that could provide the cash for more UK homes that can be made available to rent.

The suggestion is part of a wide-ranging Budget review aimed at influencing the Chancellor to ease the mortgage market. The submission also criticises current housing policies, including:

• Stamp duty holidays for first time buyers, which the CML claims creates a boom and bust market around deadline dates
• Paying housing benefits direct to claimants may damage landlord cash flows and lead to unnecessary mortgage arrears and repossessions
• Making better use of housing stock as, the CML states, most of the homes available over the next 20 years have already been built

The CML has told the Chancellor that given the vulnerabilities and uncertainties, it is important to make sure that all avenues, for strengthening and diversifying funding structures, have been explored.

The CML have also noted that the government continues to explore the obstacles to greater institutional investment in the supply of private rental property, but, strangely, the further scope for promoting domestic institutional investor interest in mortgage assets seems to be a neglected area of policy.

The Budget report also points out that UK banks and building societies rely heavily on raising funds from wholesale markets which are currently challenged by the Eurozone debt problems.

“Funding costs remain higher than a year ago, and the UK remains vulnerable to future eurozone developments. Given that current market conditions are somewhat fragile, it is very important that other government policies do not undermine housing market sentiment more generally. We believe that there are a few areas where policies are not as well aligned as they could be.” says the CML.

The CML’s calls echo the sentiment of many existing UK landlords who have had to search for a variety of additional landlord services such as insurance, tenant referencing and tenant eviction services from private sector specialist suppliers, in order to remain in a profitable situation.

With institutional investment into the UK private rented sector (PRS) specialist products and services for landlords will be enhanced for the corporate market and derivatives would be more affordable and even more readily available.

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House prices have continued to slide, although at a slightly slower pace than in the previous two months.

House prices have been falling for more than a year, although last month the decline was less widespread than in June.

Figures from the Council of Mortgage Lenders, (CML), did reveal that the mortgage market did indeed pick up in June as the number of first-time buyers and home movers increased, although the number of home loans remained low by historical standards.

The CML figures showed 46,700 mortgages were advanced for property purchases during the month of July, an increase of 22% on May 2011 figures but down 11% year-on-year.

The value of the loans also increased over the month from £5.9 Billion (GBP) to £6.7 Billion (GBP):
Of these loans, 18,100 were made to first-time buyers, up 24% on May 2011, but 8% lower than June 2010.

Home movers accounted for 28,600 loans up from 23,800 in May2011, but down from 32,800 in June 2010.

The figures took the number of mortgages advanced for house purchase in the second quarter of the year to 122,000, compared with 97,200 in the first quarter and 138,300 in the same period last year.

Remortgaging remained unchanged over the month, with 30,700 loans worth £3.8 Billion (GBP) advanced to borrowers. However, this figure is up 1% by volume and 9% by value on the same month last year.

The number of homes being repossessed fell by 1% in the second quarter of the year to 9,000, compared with 9,100 in the first three months of 2011, according to the Council of Mortgage Lenders.

The three-month figure represents a 7% fall on the number of home repossessions recorded in the second quarter of 2010 and takes the total number in the first half of 2011 to 18,100 compared with 19,500 in 2010.

Worrying signs for the future are the amount of mortgages in arrears of between 1.5% and 2.5% of the outstanding balance edged up from 77,800 to 78,500 in the second quarter of the year, and the CML did not revise its total repossession forecasts for 2011 and 2012, which stand at a 40,000 and 45,000.

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