House Prices up 1.4%. Next Steppers have good options

A Happy New Year to you all!  I hope you are holding up in the blustery and rather wet conditions!

UK House prices increased 1.4% in December according to the Nationwide House Price index.  This was some 8.4% higher than in December 2012.  The index also suggests that house prices are just 5% below the peak of 2007.  However I would think the impact of the horrendous weather recently will alter the figures somewhat in January/February.  Supply and demand is still playing a major factor with housing transactions being around 25% below 2007/8 levels, but new homes being built are around 45% lower (as at Q3, 2013).

The hope for 2014 rests a lot on the opportunities and offerings that are available to First Time Buyers.  We’re seeing a number of lenders offer mortgages to those with a 5 or 10% deposit.  I expect we will see more as the year unfolds.  Competition is good and should bring rates down at this borrowing level.

However, the ‘next step’ home movers also need attractive propositions in order to move.  There are only a handful of lenders who may consider 5% deposits to those already on the property ladder.  I would hope this offering will increase in order to help the supply chain with properties being available.  If rates remain high in this sector, there will be limited properties available to First Timers, and this will have a knock on effect.

All the while First Timers have limited options, the Buy to Let rental market will continue to flourish and this is one of the most competitive parts of the mortgage market currently.  Many options are available including innovative capital raising options to assist with the purchase of further properties.  Do be advised that market pundits are predicting that whilst house prices will rise, rental values may not, depending on the area.

Finally, the Funding for Lending scheme is coming to an end and this may possibly push up rates throughout the year.  Options are still incredibly attractive at the present time.  Long term fixed rates are sub 3% depending upon loan to value levels and for remortgages many lenders will pay the standard legal and valuation fees.   This, along with news that one in 11 people in Britain fear they won't be able to afford their mortgage or rent at the end of this month, according to research by homeless charity Shelter and YouGov, should mean that the one firm New Years Resolution is to keep on top of ALL finances.   It’s good to talk and most intermediaries will offer free mortgage advice, so don’t hang around and review your options today…

2013 was the foundation for a great 2014!

For my last column of the year, I’m not going to do the obligatory round up of the year!  Nor will I gasp my astonishment at how quickly the year has gone by.  What I will say is that I think that 2013 has been a year of foundations for what we all hope will be a fantastic year in 2014. 

Total lending for 2013 was predicted to be in the region of £150-160bn.  The actual figure will be nearer £170bn.  Predictions for 2014 are already being suggesting volumes will reach £190-£200bn (2007 was £370bn!).
Although the funding for lending scheme is being withdrawn in January, a year earlier than planned, the financial sector is in a strong position and one that we hope will be able to stand on its own two feet to move forward successfully over the coming months.

We have a new housing minister, who so far seems to be singing from the right hymn sheet and might be a friend to the industry, rather than predecessors who thought they knew best.  Working together is key for all sectors.

It is also reported that there are a number of lenders looking to enter the UK market who are in the process of getting their FCA authorisation.  More competition is great news for the economy and  can only be good news to the end consumer.

The only negative hanging over all of our heads is that the Bank of England base rate has to rise at some point.  The million dollar question is when?  If you are looking to review your mortgage at any time soon….don’t leave it too late.

Finally, a heartfelt thank you for reading my column over the last twelve months.  It has been an enjoyable(!) experience each week trying to provide an insight in to what happens behind the scenes in the mortgage market.  But I do love it!  No two days are the same and how can anyone not enjoy helping people reach their dream!? 

Thank you to all those who have used AToM to source and arrange their mortgage requirements.  We’ve had a fantastic year and enjoyed growth in both volume, with November amounting to just shy of £20m in lending, and staff numbers, with our headcount now over 20!  And what a great team they are.

On behalf of all the staff and directors at AToM, we wish you and your families a very Happy Christmas and Prosperous (& Relaxing) New Year!   We look forward to working with you in 2014.

Funding for Lending to be stopped, market confidence good.

The big news of the week is the imminent withdrawal of the Funding for Lending scheme, a year earlier than planned, by the Bank of England.   The FLS scheme was launched in July 2012 and currently offers cheap loans to lenders who in return are expected to pass on lower rates to the end consumer. 

The reasoning behind the decision given is to encourage the lenders to re-focus and increase funding loans to small businesses, rather than mortgage lending.

At a period when house prices are on the increase, lenders are citing that increased volumes and Help to Buy offerings are boosting consumer confidence, the timing might not be great (please note that Help to Buy is unaffected by the FLS scheme withdrawal). 

Many suggest that this is a sure sign that the mortgage market is in a position to move forward on its own two feet.  Only time will tell!

However, should you rush and panic to secure some of the fantastic rates currently available?  This is a difficult one to answer.  The lenders have until January to request funds from the scheme and we have no intricate small print details as to the closure of the scheme or deadlines.  As we all know, rates can really only go one way and we’ve all been trying to second guess when this may occur.  I’m hoping this is not when it will kick start!   

Nationwide’s House Price Index suggests that property values increased by 0.6% in November compared to October.  The average property price is now £175k compared to £164k a year ago.

And finally, I’ve mentioned it a number of times throughout the year, but make no apology for mentioning it again!  If you have an Interest Only mortgage, do make sure you keep reviewing the options for repaying it back.  For a customer to get to the end of their mortgage term and still owe exactly the same as when they took it out, with no form of repayment apart from selling their property, creates a major headache for the lender, especially when they want their money back!  This will once again be a major part of lenders reviews in 2014, so be on top of your options, before the lender calls!  If in doubt, seek professional advice. 

And 200 mortgage columns later....

Way back in November 2008 I was engaged in an interesting conversation about the parlous state of the mortgage world and enjoying a coffee with a friendly WSCT manager, when I inadvertently agreed to write a weekly column specifically geared to the mortgage market and its impact both locally and generally.  Who would have thought that, four years later I would still be writing it, the paper would still be publishing it and more importantly, you are still reading it! 

As I reach the 200^th column milestone, it is fair to say that it has been an enjoyable and rewarding task enabling me to express a personal view of the mechanics as well as the financial issues which affect us all in our everyday lives.  Sometimes not for the fainthearted, it has to be said, but hopefully useful nevertheless.

The last four years has seen seismic change in the mortgage sector and this has included a high street lender or two hitting the wall in late 2008. Since then I have commented on detail including a dip, a double dip and even the possibility of a triple dip recession.  None of us have any firm indication either way on the latter at the moment!  We have seen times when mortgage availability was so limited that we were almost back to the days my father sometimes refers to when mortgages were rationed and you had to have sufficient savings with a lender simply to gain an interview! 

Lenders have come, lenders have gone.  Quantitative easing, Swap rates, LIBOR Rates, Funding for Lending and many other ‘jargon’ titled mortgage terms have been regular features in my articles. In more recent times we have seen a gradual increase in mortgage product availability and more so in product innovation designed to help gaps in the market. These have included niche First Time Buyer products and the dramatic increase in Bridging Finance.  In the last few weeks I have been able to report on the fantastic rate price war in all areas of the market, which now proudly boasts over 4,000 products.  Still some way to go from the boom time of 07, but the light at the end of the tunnel may no longer be the headlights of an oncoming train!

On reflection, the last four years has been a roller coaster ride in the mortgage marketplace and I envisage that there may still be a rocky ride ahead but with a more positive outlook than at any time during that period.  I look forward to continuing to report on developments as they occur and I hope that 2013 will bring further competitiveness within the mortgage sector.  This can only be of huge benefit to the end consumer.

Finally, for this article at least, thank you to the WSCT for printing my column each week and an even bigger thank you to you for taking interest in them.  Here’s to the next 200....!