Two-fifths of potential homeowners put off by mortgage process – Perenna
A poll of more than 1,000 respondents conducted by Perenna found that 62 per cent of first-time buyers had difficulties getting a large enough mortgage for their purchase.
This was more notable in London, where property prices are around 34 per cent higher than the rest of the UK. For those buying in the capital, 65 per cent were unable to get the mortgage loan they needed due to their income.
Because of this, half of the respondents said they were delaying major life events such as marriage or starting a family in order to raise a larger deposit.
First-time buyer affordability
Perenna said longer-term fixed rate mortgages could address some of the affordability problems faced by first-time buyers, and 72 per cent of the survey’s respondents said a mortgage without the risk of rising monthly payments would give them more confidence about homeownership.
Two-fifths said mortgage lenders needed to give first-time buyers more borrowing power, and 48 per cent said that if they were able to borrow more on a mortgage for a purchase, this would be attractive to them.
Arjan Verbeek, CEO and co-founder of Perenna, said: “It’s a travesty younger people are put off from one of the most rewarding experiences in life – becoming a homeowner. Seeing mortgage payments shoot up for millions of people because of how traditional mortgages work will, of course, put off many would-be homebuyers. We need to change this trajectory urgently.
“We believe everyone deserves a chance to own their home and enjoy living in it without worry. Longer-term fixed rate mortgages are part of this solution, providing greater borrowing power and stability through payments that don’t shoot up, a far cry from the way traditional high-street mortgages work. Perenna’s goal is to make homeownership a reality for first-time buyers and make us a nation of happy homeowners.”
Perenna offers mortgages on fixed rate terms ranging from 15 to 40 years, with rates starting at 5.76 per cent for a 90 per cent loan to value (LTV) deal over 30 years with a fee and 5.99 per cent at 95 per cent LTV.
Govt promises ‘fairer’ rental sector amid speculation of no-fault eviction walk-back
A report from BBC News said draft amendments to the bill had been leaked, with measures to increase protections for landlords in the private rented sector (PRS).
The article said a draft of the changes had been circulated to a number of Tory MPs who are also landlords.
According to BBC News, amendments include the decision not to introduce a ban on no-fault evictions until the Justice Secretary produces a report on the impact it would have on the courts.
In response to the article, a spokesperson for the Department of Levelling up Housing and Communities (DLUHC) said: “Our landmark Renters Reform Bill will deliver a fairer PRS for both tenants and landlords. It will abolish section 21 evictions – giving people more security in their homes and empowering them to challenge poor practices.
“We continue to meet regularly with a range of groups, representing all those in the PRS.”
No-fault eviction uncertainty
Although housing secretary Michael Gove said a ban on section 21 notices, otherwise known as no-fault evictions, would be introduced by the next election, there have been concerns that its removal would lead to an exodus of landlords.
Shortly after the Renters Reform Bill was announced in 2022, a survey from The Mortgage Works suggested a quarter of landlords would sell up if the ban was brought in.
Last year, when the bill was going through its second reading, the government responded to a report by the Levelling Up, Housing and Communities Committee on reforming the PRS by saying no-fault eviction would not be scrapped until the court systems had been improved.
At the time, the National Residential Landlords Association (NRLA) said bringing the proposal in without court reform would result in landlords leaving the market.
In response to today’s news, Ben Beadle, chief executive of the NRLA, said the association had “long accepted” that the government had a mandate to end the use of fixed-term tenancies and no-fault evictions.
He added: “Our focus has been, and continues to be, on developing a replacement system that is fair and workable for tenants and responsible landlords. This need not be a zero-sum game between the two.
“The NRLA has consistently campaigned for the bill to balance the protections promised to tenants and the legitimate business needs of landlords to enable them to continue to provide rented homes.”
Beadle said: “If the government is considering amendments that would provide for assurances to landlords with a six-month minimum term and ensure confidence for all in the court process, then that balance would be struck. We now need to see these amendments published in full so that all parties can judge for themselves what is on the table and move on with debating the bill in public.
“The lack of progress and uncertainty about the future is destabilising and damaging for those living and working in the PRS.”
Average mortgage rates continue marginal rise – Rightmove
Rightmove’s weekly mortgage tracker found that the average two-year fixed rate was 5.15 per cent as of 28 February, compared to 5.08 per cent last week. Over the same period, the average five-year fixed rate increased from 4.72 per cent to 4.8 per cent.
Mortgage rates were also higher compared to last year, when they came to 4.92 per cent for an average two-year fixed rate and 4.59 per cent for an average five-year fixed rate.
At 60 per cent loan to value (LTV), the average two-year fixed rate was 4.62 per cent, and the average five-year fix was 4.3 per cent. This was compared to respective average mortgage rates of 4.5 per cent and 4.19 per cent a week ago.
The average two-year fixed rate for a 75 per cent LTV mortgage was 4.99 per cent as of today, compared to 4.9 per cent last week. For a five-year fix at the same tier, the average was 4.7 per cent, up from 4.61 per cent a week ago.
For an 85 per cent LTV product, the average two-year fixed rate came to 4.73 per cent, up from 4.67 per cent, while the average five-year fixed rate rose from 5.08 per cent to 5.14 per cent this week.
At 90 per cent LTV, the average two-year fixed rate went up from 5.31 per cent a week ago to 5.38 per cent as of 28 February. The average five-year fixed rate rose from 5.31 per cent to 5.38 per cent.
There was less movement at the 95 per cent LTV tier, as the average two-year fixed rate was unchanged at 5.79 per cent, while the average five-year fixed rate saw a small increase from 5.35 per cent to 5.38 per cent.
Little change to first-time buyer payments
Rightmove calculated that the average monthly payment for a first-time buyer taking a five-year fixed mortgage at 85 per cent LTV would be £1,087, just £6 more than last week.
It is also a small difference from the average of £1,070 a year ago.
Propertymark asks lenders to bring in affordable mortgage rates
Propertymark said that, with inflation steadying and expectations for base rate cuts, it was “keen” to see lenders take this action.
It pointed to Halifax, which announced rate reductions last week, amid a trend of other lenders increasing their mortgage pricing.
Halifax made reductions of up to 0.34 per cent to its range, with the headline cut applied to a three-year fixed remortgage at 90 per cent loan to value (LTV), putting the rate at 5.55 per cent.
Across its purchase products, a two-year fix at 90-95 per cent LTV went down by 0.3 per cent to 5.15 per cent, while the five-year fixed equivalent was reduced by 0.28 per cent to 4.92 per cent.
Propertymark also mentioned the introduction of the 99 per cent mortgages, which has been rumoured as an incoming government policy, set to be announced at next week’s Spring Budget.
The association said that, if the scheme was approved, it would help some people get onto the property ladder, but could risk “artificially” inflating house prices due to higher demand.
Nathan Emerson, CEO at Propertymark, said: “Propertymark are keen to see first-time buyers assisted with their property-buying journey, and lower-rate mortgage products are always an encouraging first step to boost affordability for many.
“It’s important any additional incentive schemes are well-thought-out and structured in a way that supports the wider housing market – there must be an understanding that rapidly increasing demand within one demographic may cause an unintended consequence for others. Ultimately, with an ever-growing population, greater emphasis needs placing on ensuring there is a considered range of new sustainable housing being built at a rate that keeps pace with demand.”
Principality BS widens non-EEA mortgage policy
Principality Building Society will now lend up to 95 per cent loan to value (LTV) for EEA and non-EEA applicants, and has shortened the time a non-EEA national needs to have lived in the UK from three years to two. The latter change is subject to the applicant passing a credit score.
The mutual has also reduced the amount of time an applicant needs to have remaining on their visa from two years to 12 months.
These changes were made in response to feedback from brokers.
Helen Lewis, national intermediary manager at Principality Building Society, said: “As a lender, Principality has engaged with brokers to help identify how we can develop our criteria to support their clients. We have taken a common-sense approach to lending, understanding that not every case is straightforward. Feedback from brokers suggests there is an increased difficulty finding a suitable solution for their non-EEA clients.
“The introduction of these changes to our lending criteria will hopefully make mortgages more accessible for clients looking to purchase a home in the UK.”
The amendments form a series of revisions made by Principality Building Society regarding non-EEA mortgage applicants, including making exceptions for people in high demand or with highly skilled roles, such as NHS workers. It also increased income multiples for newly qualified professionals and NHS workers.
In its most recent results, the mutual reported a £1.1bn annual rise in its mortgage book to £9.3m for the year ending 2023.
Principality Building Society posted an underlying profit before tax of £60.3m in 2023, up from £43.5m in the previous year.
Co-op Bank’s gross mortgage lending falls to £4.8bn in 2023
In its annual financial results, Co-op Bank said its mortgage book was “stable” and “low-risk”, with just 0.21 per cent of accounts more than three months in arrears. Further, just a tenth of its book has a loan to value (LTV) greater than 80 per cent.
The average LTV of its core mortgage book was 55.7 per cent in 2023, relatively unchanged from the average of 53.5 per cent at the end of 2022.
Chief executive Nick Slape said 57 per cent of the bank’s gross mortgage lending was made up of retained balances, while its average completion margin was 0.61 per cent, down from 0.77 per cent in 2022. Slape said this was in line with market trends and improved in the final quarter of 2023 as swap rates reduced.
The bank said that, because of this, it “strategically preserved” its margins by managing new business volumes.
Co-op Bank’s acquisition of Sainsbury’s Bank’s mortgage portfolio added around 3,500 customers and £500m in mortgage balances to the lender.
Slape said this demonstrated the bank’s “strength in a competitive UK mortgage market, allowing us to grow balances whilst protecting margins”.
There was a shift to shorter-term mortgages in 2023, the bank said, which it attributed to higher interest rates. Co-op Bank said 27 per cent of its completions were for two-year mortgages, compared to 18 per cent in 2022.
Mortgage prisoner payout
Co-op Bank confirmed it is to pay £28.9m to closed-book mortgage customers who complained about the standard variable rates (SVRs) they were charged between 2011 and 2012.
In November, the Financial Ombudsman Service (FOS) said the bank should redress borrowers who saw their SVR rise from 2.99 per cent to 5.75 per cent over a three-year period.
Co-op Bank board applied the FOS’ findings to borrowers with similar characteristics, even if they did not complain, and decided they should all be compensated. A provision for redress had been recognised.
Profits dented by mortgage redress
Co-op Bank reported a statutory profit before tax of £71.4m, compared to £132.6m in 2022.
It had an underlying profit before tax of £120.9m, down from £136m.
Slape said: “The underlying profit before tax of £120.9m reflects our strong, sustainable and low-risk business model, while statutory profit before tax of £71.4m was impacted by exceptional redress on legacy mortgage business, strategic transformation and adviser costs.”
It invested £14.7m in its mortgage and savings platform, while advisory costs relating to a review of its strategic options came to £7.8m, up from £600,000 in 2022.
In December, Co-op Bank announced it was in exclusive talks with Coventry Building Society regarding a possible merger. It said the discussions were still at the “preliminary stage” and there was “no guarantee that these discussions will result in any potential transaction”.
The bank saw its net interest income (NII) rise by four per cent to £477m, while its net interest margin (NIM) increased by 14 basis points to 1.8 per cent, owing to the increases in the base rate.
Slape said: “2023 has been a year of transformation, and I am extremely proud of what we have achieved.
“We have made significant progress on our IT simplification programme, including successfully in-housing our mortgage servicing capabilities, going live with our new cloud-based mortgage platform and completing 67 per cent of our savings migration. We remain on track to complete the programme in 2024.”
Slape said the bank had an “excellent start” to the year, adding: “We received over 12,500 new current account applications in January, representing an increase of over 300 per cent versus the same period last year. New mortgage origination has also been strong, with £1.2bn applications in January. Looking to the future, whilst the economic outlook remains uncertain, the bank is well-positioned with a low-risk balance sheet and strong capital and liquidity positions.
“We remain focused on delivering attractive and sustainable returns to our shareholders through growing our core mortgage and current account business, supported by the diversification of our mortgage offering and evolving our SME lending proposition.”
Darlington BS recognises broker workload with higher PT proc fee
This was previously 0.2 per cent, and Darlington Building Society said it was done in recognition of the raised expectations placed on brokers following the introduction of Consumer Duty.
The mutual said meeting the Consumer Duty requirements took more time, particularly in the current competitive mortgage market.
Chris Blewitt (pictured), head of intermediary distribution at Darlington Building Society, said: “Through ongoing conversations with our broker partners, we know that brokers’ time is tighter than ever at the minute. Brokers are working in a highly competitive market against a backdrop of changing regulation. This all takes more time to find those perfect-fit mortgages for their clients, and we understand.
“That’s why we have enhanced our procurement fees on all product transfers to 0.3 per cent, recognising our valued broker partners’ time. It’s important to reflect on and appreciate the hard work that goes into finding people their dream homes, and the best mortgage for their circumstances and requirements.”
He added: “We’re here. We’ve heard, we’re helping.”
This comes after the mutual’s investment in its technology to further support brokers.
All of its mortgages and product transfers can now be processed through the Iress MSO platform and decisions in principle or full mortgage applications can be pre-populated directly from a broker’s CRM into Darlington Building Society’s system.
It also has a dedicated digital business development manager (BDM) that can go through an application on-screen at any time.
Chancellor contemplates NI tax cut – reports
First reported in The Times, Hunt is rumoured to be thinking about a one per cent reduction, which will cost around £4.5bn per year. This is lower than the 2p reduction in income tax that was speculated last month, then reportedly dropped as it was announced that the UK’s economy was in recession.
This tax cut would have cost £13.7bn per year.
Earlier today, the think tank Institute for Fiscal Studies (IFS) warned there was a “weak case” for notable tax cuts due to an increase in debt interest spending. It said this was forecast to be at two per cent of national income, equivalent to £55bn per year.
The IFS said the Chancellor should consider a stamp duty cut instead, as it called the tax “particularly damaging” and said reforming this should be “front of the queue for growth-friendly tax cuts”.
The suggestion comes after a group of Conservative MPs said the stamp duty tax should be removed for people who want to downsize.
Hunt is also rumoured to introduce a vape tax at the Spring Budget to make the habit less affordable and discourage young people from taking it up.
Other speculated measures include the launch of a 99 per cent mortgage scheme.
The Spring Budget will take place on 6 March.
EPC deadline for commercial properties extended by a year
Trade association Propertymark received clarification from the government after it wrote to the Secretary of State for Energy Security and Net Zero to find out if the relaxation of EPC standards on owner occupiers and the private rented sector (PRS) also applied to the commercial market.
Last year, Prime Minister Rishi Sunak announced that private landlords would no longer be required to improve the EPC rating of their portfolio to a C by 2028.
The commercial property sector still has an overall target of improving the EPC rating of properties to a B by 2030. Agents were originally required to bring this up to a C by 2027, and this has been pushed back to 2028.
Propertymark also met with representatives from the Department for Energy Security and Net Zero (DESNZ), who said the government would support commercial property agents in improving the energy efficiency of their assets with a proposed grants scheme.
The department said it would also set up a Business Energy Advice Service to support firms with the decarbonisation process. It is currently using the West Midlands Combined Authority as a pilot, and this is expected to become national in England and Wales by 2025.
The British Energy Security Strategy was also published in 2022 with advice on how smaller businesses can improve energy efficiency and meet the government’s net-zero targets.
Some 4,000 energy-efficiency assessments are expected to be completed by 31 March 2025.
Tim Thomas, policy and campaigns officer at Propertymark, said: “We are pleased that the UK government has provided greater clarity on decarbonisation targets for non-domestic property in England and Wales. Whilst we welcome the milestone targets being moved, the UK government must speed up support through grants and advice to support commercial agents decarbonise their properties.
“In the meantime, we advise commercial agents within the West Midlands area to liaise with the pilot Business Energy Advice Service if they require any support and advice, as the decarbonisation of commercial property can be more complex than residential property. Propertymark looks forward to the support service going national.”
Mortgage broker firms plan expansion – Paragon
Despite challenges in the market, a poll conducted by Paragon Bank found most mortgage broker firms were looking to increase their headcount.
Some 48 per cent said they wanted to hire experienced advisers who could do the job immediately and potentially diversify into complex markets.
According to the survey, three in 10 mortgage broker firms were planning to recruit trainee advisers and support their career growth, while a quarter wanted to hire paraplanners to help advisers with administrative tasks.
Just seven per cent of mortgage advice businesses said they would be scaling back their operations.
Richard Rowntree, managing director for mortgages at Paragon Bank, said: “It’s really encouraging to see intermediary firms expanding – it gives a good indication of the strength of the market and could be viewed as a reflection of the more positive outlook for this year.”
Recruiting the right mortgage brokers
The survey of 330 found that there were challenges when it came to recruitment, with a third saying it was ‘fairly difficult’ to attract new staff and 31 per cent saying it was ‘very difficult’. Just five per cent said it was ‘very easy’ to recruit staff, while 19 per cent said it was ‘fairly easy’.
To work around this, firms have been upskilling their existing employees instead, with nearly half of the mortgage brokers polled saying they had introduced or were planning to bring in career development programmes.
Additionally, 31 per cent of firms will invest in their technology and 30 per cent will improve their marketing.
Rowntree added: “While I’m aware of the difficulty for those looking to take on experienced advisers, in line with data pointing to a tightening of the broader labour market in the UK, it’s reassuring to see that firms are mitigating any resource shortfalls by developing existing employees or investing in marketing and technology.
“Doing so will help to ensure that there is a wealth of talent available, both now and in future, to support borrowers with sound financial advice to guide their investment strategies.”