Income multiple needed by first-time buyers running at 5.6 times – Nationwide
However, it said 3.2 times was now looking like a distant memory with that multiple having not held true for about 20 years.
The 75 per cent rise in multiples shows how fast house prices in the UK have raced away from average incomes over the past two decades.
The insight was drawn from Nationwide’s own data, and was released ahead of a research report looking at housing for the post-pandemic years, Future of Home, which the lender has produced with Ipsos MORI and will publish on Monday.
David Hollingworth, associate director communications, L&C Mortgages, said: “We talk a lot about deals for first-time buyers with smaller deposits, but with the multiple so high it shines a light on the fact that a big blocker is because borrowers’ affordability caps out at below the prices they might have to pay.”
Other highlights picked out ahead of the report’s launch included findings of research by Ipsos MORI such as the number of households occupied by homeowners is now 57 per cent, down from 64 per cent in 2003.
Some 63 per cent of people in the UK consider themselves to be living through a housing crisis, while 68 per cent of people renting believe they will never afford to buy a home.
Some 48 per cent of renters said their experience during the pandemic had made owning their own home more important than it was 18 months ago.
About 25 per cent of people believed the pandemic had worsened the housing crisis.
Affordability was a huge challenge for renters, with 41 per cent saying that getting together a deposit and meeting other upfront purchase costs made it unaffordable to buy a home.
Hollingworth said: “In the main, lenders say ‘this is our affordability test’. They may offer a graduated income multiple. But they will push down on multiples at the higher loan to values (LTVs).”
He welcomed Nationwide’s Helping Hand proposition, launched in April, as a well-balanced attempt to address these challenges. The product offers 5.5 times salary to first-time buyers up to 90 per cent LTV, on a five or 10-year fixed rate.
Sara Bennison, chief product and marketing officer at Nationwide, said: “Our research, and cross industry conversations, show that the pandemic has exacerbated long-standing issues in the housing market.
“Layer onto that the enormous challenge of making the UK’s homes net zero and the challenge ahead becomes even greater.
“The need for more homes, more affordable homes and more sustainable homes are some of the critical questions we want to address,” Bennison said.
Pepper plans new proposition after completing largest securitisation yet
The £425m securitisation deal comprised first charge mortgages and was the third to be issued under the lender’s Polaris banner.
Laurence Morey, chief executive at Pepper Money (pictured), said it received “very strong support from a wide range of investors.”
“We’re now in an exciting position to plan further growth of lending,” Morey added.
“We aim to take our robust and inclusive approach to lending to new propositions, including affordable home ownership, over the coming weeks and months.
“We have already launched products to help a wider range of customers, such as our cashback offering for those wanting to consolidate debts,” Morey said.
“The strong investor appetite for this securitisation is testament to the high quality assets that we generate, thanks to our exceptional team, which throughout the pandemic remained focused on delivering for customers,” he added.
The Polaris deals are separate from Pepper’s series of three Castell securitisations, which have been completed on second charge mortgages.
NatWest sells Ulster Bank mortgage book in ongoing withdrawal from Ireland
The deal includes €7.6bn of loans, the majority being non-tracker mortgages, as well as micro SME loans, an asset finance business and 25 out of 88 Ulster Bank branches. About 500 to 600 staff are expected to transfer according to the agreement.
“There is no immediate change for Ulster Bank customers”, the group statement said.
In return, NatWest will receive cash and a 20 per cent stake in PTSB.
Alison Rose, NatWest Group chief executive, (pictured) said: “In line with our strategy of a phased withdrawal from the Republic of Ireland, this is a significant update in the form of a non-binding memorandum of understanding with PTSB.
“It builds on the recently announced sale of the majority of Ulster Bank’s commercial banking business to Allied Irish Bank,” Rose added.
Brokers hope for clarity from FCA mortgage prisoners review
A cohort of willing brokers signed up with the FCA to help mortgage prisoners, in an initiative last summer where a letter was sent out inviting the borrowers to contact an adviser to review their options.
Ray Boulger, senior mortgage technical manager at John Charcol, said: “The question is, why didn’t more people come forward? It could be there’s not much benefit to them of doing so. Particularly for those who’ve been paying down repayment mortgages, the loans may be fairly small and so the benefit of a lower rate is smaller.”
About 80 per cent of mortgage prisoners are thought to be on rates of about four per cent.
The advisers signing up to the initiative agreed to offer fee-fee advice, and to provide data to the FCA on numbers of inbound calls received, fact finds conducted and applications submitted.
The number of borrowers contacting brokers were relatively small, while the proportion overall who have remortgaged or transferred is thought to be in the low teens.
“We need detailed research for a significant proportion of mortgage prisoners, to make it clear how many could get a useful benefit from remortgaging or, because of the size of the loan or credit situation, they would not do,” said Boulger.
He added it was surprising the situation had gone so far without the FCA having this information. “If you’re trying to help mortgage prisoners, obviously you need to understand who they are,” he said.
The FCA has classed about 250,000 borrowers as mortgage prisoners. The regulator will now further investigate their characteristics to understand what actions may be helpful.
Additional economic challenges arising during the pandemic are thought likely to see the number rise.
Charlotte Nixon, proposition director at Quilter, said: “It’s clear the FCA has good intentions to do the right thing by customers, but unless lenders can be more flexible, there is not much more we can do in the broker space.”
She said lending criteria had tightened during the pandemic.
“Of course lenders have their own risk appetite. But they are being picky at the moment, especially with first-time buyers and the self-employed,” Nixon said.
“We need to support customers who borrowed according to the rules before the financial crisis. During the early stages of the pandemic, we took our hats off to lenders as they made changes overnight to support borrowers. This now risks casting a long shadow over the sector,” she said.
Key Mortgage Advice, which offers options for older borrowers who may be eligible for retirement interest-only (RIO) or equity release, also welcomed the FCA’s next steps.
“The review of existing measures is important. With a significant cohort of mortgage prisoners being older borrowers, it is particularly frustrating to know that with the right specialist advice many may be able to benefit from a RIO or equity release mortgage, which might better meet their needs.
“We need to push forward and help these borrowers achieve the right outcome for their individual circumstances,” he said.
BFS posts record month for lending in June
Lending in June was 51 per cent higher than for its previous best over 15 years of lending.
Lee Gilmore, head of business development at BFS (pictured), said: “We have far surpassed our goals and to do it during the pandemic is an amazing achievement.
“Three months in early 2020 were severely impacted by Covid, however, comparing H1 2021 to H1 2019 we still increased lending by 36 per cent.”
“We believe some of the increase has been through a shift in the way we structure deals, with more focus on the headline interest rates, which has undoubtedly attracted more customers,” he said.
“This performance gives us solid foundations on which to build further still,” Gilmore added.
Octane Capital tops £100m of lending in a quarter for first time
Octane received 325 applications and completed 166 loans in the three months.
The performance included a 15 per cent rise in the number of foreign nationals among its customers, the steepest quarterly rise yet.
Mark Posniak, managing director at Octane Capital, (pictured) said: “Activity levels have been off the scale. The stamp duty holiday was a driver. And we are seeing high demand from foreign nationals, mostly from outside the EU, who increasingly see UK property as a safe haven.”
The proportion of foreign national borrowers buying properties outside London was 36 per cent in the six months to end of June, up from eight per cent in the lender’s launch year in 2017.
Treasury to sell down NatWest holding over the coming year
Morgan Stanley has been appointed to effect the plan, with the share sales starting from 21 August — the end of a three-month lock up period that followed a share sale in May.
Up to 15 per cent of the aggregate total trading volume in the bank’s shares will be sold over the duration of the plan.
UK Government Investments (UKGI), the entity overseeing the Treasury’s stake in NatWest, said: “Shares may not be sold under the plan below a price per share that UKGI and Treasury determine represents fair value and delivers value for money for the taxpayer.”
The Financial Times reported that the bank’s current share price remains 60 per cent lower than the average price paid by government to bail it out.
The government spent £46bn rescuing NatWest, formerly Royal Bank of Scotland, when it became caught up in the financial crisis of 2009.
UKGI still owns 54.7 per cent of NatWest’s shares.
L&G Modular Homes scheme in Kent to deliver EPC A-rated homes
The scheme, which has won grant funding from Homes England, will deliver a range of two, three and four-bed homes through Town & Country’s Love Living Homes brand.
These will be a mix of affordable homes for shared ownership and social rent.
The dwellings have been designed to achieve an Energy Performance Certificate (EPC) A rating, which will put them in the top one per cent of homes for energy efficiency in England and Wales.
They will be built in the L&G Modular Homes’s factory in Yorkshire (pictured) and bring the total pipeline of new homes at the firm to 670.
The scheme will create 300 jobs and plant 8,500 trees.
Nicola Schutrups, managing director at The Mortgage Hut, said: “Although not all lenders lend on modular housing, we are seeing more and more coming into this space, and most just require the Build Offsite Property Assurance Scheme (BOPAS) accreditation from the developer.
“We recently did some research for a local housing association that was looking at this as an option and found a few lenders that would allow up to 95 per cent lending on shared ownership properties.
“It’s a good solution to increased demand for housing,” Schutrups added.
L&G Modular Homes aims to increase its delivery to 3,000 prefabs a year by 2024, with the offsite building method cutting delivery times by half.
Rosie Toogood, chief executive, L&G Modular Homes, said: “Through modular construction we are able to deliver affordable, carbon-friendly homes, set within green open spaces and a well-connected community.”
“This latest scheme, along with those in Selby, Bristol, and North Horsham, will showcase the part modular homes can play,” she said.
Colin Lissenden, development director at Town & Country Housing, said: “We’re keen to explore innovative ways to provide affordable housing. We’re delighted to have secured grant funding from Homes England to bring our joint vision into reality.”
FCA to hear from brokers through mortgage prisoner review
The review aims to improve the data available about mortgage prisoners and to assess the effectiveness of two interventions that were supposed to have helped the trapped borrowers.
On data, the FCA and Treasury will collaborate to produce new information with more detail on the demographics and loan characteristics of mortgage prisoners. They will make use of latest product sales data and credit reference agency data.
The FCA will also review how it has produced figures saying how many mortgagees with inactive firms are unable to switch despite being up-to-date with payments. It admitted that July 2020 assumptions led to “a low estimate” and that use of latest data – including taking account of economic shifts during the pandemic – would likely result in a higher number.
As to interventions, it will review the effects of two interventions, namely modifying affordability assessments and a rule change on intra-group switching.
The affordability change review will look at take-up of resources and support from mortgage brokers who have agreed to provide advice to mortgage prisoners, and will consider Money and Pensions Service and FCA product sales data.
The regulator will also look at the extent of borrowers switching within lending groups.
The review is happening from July to October, with stakeholder engagement expected in July and August.
The resulting report to Treasury will be put before Parliament by the end of November.
Rachel Neale, lead campaigner at UK Mortgage Prisoners, said: “Looking into the characteristics of mortgage prisoners is a way to victimise us, saying we are people who shouldn’t have borrowed what we did or how we did it.
“These products were regulated by the FCA. And anyway, it was not the products that landed us in this mess. It was a failure by Treasury to put in place adequate protections when it sold the mortgage books.”
The group was grateful to be invited by FCA to participate in stakeholder discussions, but feared the review would be the latest in a series of moves by Treasury “to kick the can down the road,” Neale said.
“Nothing will happen until at least next year. This is winding down the clock until people lose their homes, come to end of term, or die,” she added.
Together mulling a possible sale or IPO – reports
Bloomberg News said Together could attract interest from established lenders, with an initial public offering (IPO) also a possible option.
Financial advisory group Rothschild & Co was reportedly working with Together.
Together’s spokesperson said: “We don’t comment on media speculation.” Rothschild refused to comment.
The lender issued a trading update for its fourth quarter ending 30 June 2021 on Tuesday.
Originations had grown by 17.1 per cent to £146.9m in the quarter, compared to £125.4m for the three months January to March 2021.
In June, originations hit £190.3m, “the highest monthly lending since the first UK lockdown”, Together said.
The lender had reported a “£3.9bn diversified, secured loan book with very conservative loan to values”, as of 31 March.
Gerald Grimes, group chief executive designate at Together, said of the latest trading update: “We have maintained our strong momentum into the fourth quarter. We have also added further strength and depth to our funding structure as we continue to shape our business for the future.
“With demand for specialist lending products expected to grow strongly, Together is well placed to help increasing numbers of customers to realise their ambitions and to support the UK economy in bouncing back from the pandemic.”
The firm had added £345m of facilities to its funding platform since 31 March.
“We continued to add diversity and maturity to our funding structure during the quarter, with the completion of our second small balance commercial real estate mortgage backed securitisation, CRE2, for £249m in June, just three months after we issued the first transaction of this kind since the global financial crisis,” it said.
“Since the year end we have also issued the £96.2m Brooks ABS1 transaction, our first facility for non-performing loans and our sixth successful funding transition since the start of the Covid-19 pandemic,” the company added.
In February, Together had reported £896m of new lending in the calendar year 2020, £1.3bn lower compared to £2.2bn in 2019, owing to the pandemic.
The firm was founded by Henry Moser in 1974 and has grown to become a leader in specialist lending.
Moser has featured as a regular on the Sunday Times’ Rich List, this year ranking at number 156 with net worth of £1.1bn.