Posts with tag: mortgage market activity

FCA to Conduct Three Mortgage Market Reviews

Published On: September 8, 2015 at 12:46 pm


Categories: Finance News

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The Financial Conduct Authority (FCA) has announced that it will conduct a study on the mortgage market early next year, something that it first mentioned in June.

The City regulator, which started a review into responsible lending in April, will specifically look at strict new rules introduced under the Mortgage Market Review (MMR) in spring 2014.

This will be one of three reviews over the next year.

FCA to Conduct Three Mortgage Market Reviews

FCA to Conduct Three Mortgage Market Reviews

Alongside the post-MMR responsible lending review, the FCA will provide a more general review of the mortgage market and a review into financial advice, including mortgage advice.

Under the MMR, mortgage applicants must now undergo affordability checks, including an examination of their spending habits and an assessment of their ability to keep up repayments if interest rates rise.

In a speech at the FCA conference in central London yesterday, Christopher Woolard, Director of Strategy and Competition at the FCA, says there have been questions over whether “those interventions might lead to a drying up of the market… The MMR alone was predicted to affect mortgage approvals by anything up to 20%.”

Instead, he revealed, mortgage approvals have grown.

He continued: “There is clearly a question here as to what the ideal level of activity is and how you achieve it.

“No one, frankly, wants to return to the unaffordable lending practises of the past, where almost every application was approved.

“We do, however, have to remain sensitive to the impact of these reforms over the long run.”

He said: “Even if we believe our rules are proportionate, we need to remain alert to how firms are interpreting them and the effect on consumers.

“That is why we will be undertaking a mortgage market study soon, which will include a review on key aspects of the implementation of the MMR.”

In the speech, Woolard also stated: “Few issues in the UK matter more to the general public than homeownership.

“As a nation, we consume huge amounts of information about property. We are borrowing more. And we’re spending increasing amounts of disposable income on homes.”1

He said that on one hand, homeowners are hoping house prices will rise, but on the other, first time buyers hope they will go down.


Remortgaging Activity Surged in August

Published On: September 8, 2015 at 11:43 am


Categories: Finance News

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Remortgaging activity outperformed all other sectors of the housing market in August, according to new research from Connells Survey & Valuation.

The number of valuations for remortgaging increased by 25% in August compared with July. As a result, the amount of remortgage valuations grew by 102% over the last 12 months.

Total valuation activity was slower in August. The number of valuations across all sectors, including remortgaging, rose by 7% monthly. Activity increased by 48% compared with August 2014, mostly driven by remortgaging.

Corporate Services Director of Connells Survey & Valuation, John Bagshaw, says: “Concern and media attention about an interest rate rise in the near future is the key driver of this surge.

Remortgaging Activity Surged in August

Remortgaging Activity Surged in August

“Due to the very low Bank of England base rate, there are currently some very appealing remortgaging deals on offer from lenders. But homeowners have been influenced by a powerful perception that these deals will not last.

“Underneath the short-term surge, remortgaging is also driven by a longer term shift. People are increasingly looking to upgrade their home rather than trade, and so, for a slightly different purpose, are also keen to take advantage of cheaper mortgage deals.

“Meanwhile, the wider picture looks encouragingly stable. First time buyers and homeowners are far more optimistic about the housing market now than they were at this point in 2014, and this is evident from the strong, steady growth we’ve been seeing throughout 2015.”

The amount of valuations for existing owner-occupiers looking to move house has increased by 3% since July. As a result, activity on behalf of home movers rose by 30% from August 2014.

First time buyer activity was similar. The number of valuations conducted in August for those looking to buy their first home rose by 1% monthly and 31% year-on-year.

Bagshaw continues: “Home mover and first time buyer activity has been sizeable and speedy growth over the last six months, so a period of more stable growth is a sign of consolidation.

“It shows that these sectors command long-term momentum and demonstrates a more stable optimism from households about the future.

“For those moving up the ladder, low mortgage rates are combining with property price growth as a basis for their next purchase. Meanwhile, first time buyers don’t have the benefit of this natural deposit, but are showing remarkable fortitude in the face of price rises – buoyed by a jobs market that is increasingly showing real wage growth.”

The only sector to see a fall in August activity was buy-to-let, in which valuations dropped by 5% on July. Despite this, the total number of valuations carried out for buy-to-let investors increased by 29% compared to last year.

He concludes: “Buy-to-let has retained its winning popularity with investors. The slight slowdown the sector experienced this month is likely due to some investors taking a step back to calculate the cost of the Chancellor scrapping certain tax exemptions for buy-to-let landlords in the summer Budget.

“However, the fundamentals of the rental market remain very strong, driven by tenant demand. Even buy-to-let – once a rollercoaster sector in terms of growth – is showing signs of settling into a positive pattern of strong and steady growth, a pattern replicated across many other sectors of the mortgage market.”1


CML Changes Mortgage Lending Forecast for the Year

A stable economy should support a steady improvement in housing and mortgage market activity in the next few months, according to the latest forecast by the Council of Mortgage Lenders (CML).

CML Changes Mortgage Lending Forecast for the Year

CML Changes Mortgage Lending Forecast for the Year

The CML market review report says that this follows a quiet market over the past year, which has caused the CML to revise its expectations for gross mortgage lending to £209 billion in 2015, from the previously predicted £220 billion.

Chief Economist at the CML, Bob Pannell, comments: “Several of the Government’s fresh housing initiatives will take time to take effect and so do not fundamentally reshape market prospects this year or next, as far as we can judge at this stage.”

The report states that although house prices have increased and growth is continuing to surpass earnings in most of the country, the potential for lending is likely to be restricted by affordability pressures, strengthened by the Mortgage Market Review (MMR) and macro-prudential rules.

It also says that any negative perceptions of the buy-to-let sector could be wrong, as remortgaging activity accounts for over half of overall buy-to-let lending, a much larger share than for homeowner loans.

Pannell continues: “Although buy-to-let business volumes continue to expand, the underlying pace of growth in buy-to-let activity, both for house purchase and refinancing, has been slowing, following its strong recovery over the past few years. Policy interventions in the buy-to-let space may reinforce this downward trend.

“We expect a further improvement in arrears and possessions this year and anticipate that the overwhelming majority of borrowers will cope with the modest interest rate increases that start in 2016.”1 

Generally, the CML is more optimistic about housing market developments now than it was at the start of the year and Pannell claims that this is due to the continuing strength of cash transactions, which have accounted for almost 37% of all transactions over the past year.

He adds that regulated house purchase activity has continued to decline compared to the market as a whole in the last year, which has pulled down the CML’s overall mortgage lending predictions for 2015.