Mortgage approvals and lending falling – Bank of England
The central bank reported that purchase approvals dropped by around 3,000 in the month to 62,300, although this was marginally offset by a slight increase in the number of approvals for remortgages, from 49,289 to 49,713.
However, new gross lending dipped to £21.6bn in the month, down from £22.6bn in February, and also down from £22bn in March 2018.
Remortgaging pushes market
Jonathan Harris, director of Anderson Harris, argued that Brexit uncertainty was clearly still having an impact on people’s property decisions.
He continued: “That said, mortgage lending picked up in March compared with February as some people got on with buying and selling their homes regardless. Much of the activity was down to remortgaging as borrowers locked into some of the competitive fixes currently available to protect themselves from potential future uncertainty.”
Richard Pike, director of sales and marketing at Phoebus Software, said the Bank of England figures were a “mixed picture”, but suggested that there will come a time when Brexit-related caution is thrown to the wind and people push on regardless.
“Then we’ll see how well the housing market copes with demand. That being said, it would be a very brave person that would put their hat in the ring with concrete predictions for the coming months,” he added.
Nick Chadbourne, chief executive of LMS, suggested that April will likely be a strong month for completions, though new enquiries may tail-off.
“However, as we move into summer, both are likely to build again, delivering a surge in demand for mortgage brokers, lenders, and conveyancers,” he continued.
Transactions jump 2.7% in February: HMRC
That’s a 2.7 per cent increase on the same point last year, as well as a 1.7 per cent jump from January.
The taxman noted that besides 2016, when transactions jumped in the rush to beat the introduction of the higher rate of stamp duty on additional property purchases, “residential transactions in February have remained relatively stable over the previous five years.”
There was an even more significant jump in non-residential property purchases, with 10,650 transactions taking place in February, up by 2.1 per cent from last year and 6.7 per cent from January.
Swap rates mean mortgages are stable too
Jonathan Harris, director of Anderson Harris, admitted that February is never likely to be the busiest month of the year but argued that it is “holding up remarkably well” considering the effects of the “Brexit debacle” on buyer and seller sentiment.
He continued: “On the lending front, Swap rates are also fairly stable and therefore mortgage rates are as well. There is much speculation as to what will happen to rates in the next few months but for now mortgage rates are extremely competitive with plenty of attractive options for those brave enough to take the plunge.”
Gareth Lewis, commercial director of specialist lender MT Finance, said that month-on-month growth for the housing market was “no mean feat when you consider the ongoing farce that is Brexit”, noting the property market is ticking along regardless.
“There is no doom and gloom around it, there is still positive sentiment and people are transacting,” he added.
A short-lived downturn on the way?
Mike Scott, chief property analyst at online estate agent Yopa, said the figures confirm the “surprising strength” of the property market at the moment.
He concluded: “These sales will have been agreed in the autumn of 2018 when the Brexit deadline was less pressing, but the positive numbers suggest that any downturn in market activity due to the political uncertainty will be short-lived.”
Product transfer rates up to 0.35% cheaper than new deals – Anderson Harris
Anderson Harris looked at three lenders – Accord, Skipton Building Society and Platform – and found all were offering existing customers better rates than new borrowers when it came to two year fixed rate mortgages.
At Accord the margin was most significant with customers on 70 per cent loan to value (LTV) mortgages able to get a product transfer rate of 1.53 per cent compared to the 1.88 rate available to new customers.
With both Skipton BS and Platform the difference between rates available for new and existing customers was 0.15 per cent.
When it came to five year fixes on 70 percent LTV, the differential was smaller. Platform offers product transfers to customers at 1.94 per cent while new customers get 1.99. With Barclays, it was 1.98 per cent for transfers and 1.99 for newcomers.
Jonathan Harris, director of Anderson Harris, which carried out the research, said: “The mortgage market is extremely competitive right now so it makes sense that lenders want to hang onto customers by offering them attractive deals, rather than letting them remortgage to a rival lender.
“It is good news for the borrower as it’s much easier and quicker to do a product transfer than go through a new mortgage application process for another lender.
“However, not all lenders will offer such good deals to existing customers so it is still worth borrowers contacting a mortgage broker just to check whether there is a better deal out there.”
Return to ‘old-fashioned underwriting’ with high net worth clients – Anderson Harris
Anderson Harris director Adrian Anderson highlighted that brokers need to ask more questions than they do with mainstream clients and they should be prepared for more complexity.
Speaking on Mortgage Solutions Television in association with Investec Private Bank, Anderson said: “High net worth clients’ requirements might be more complex and their financial circumstances and position can be more complicated.
“For high net worth clients, I ask even more questions than I would do if it was a simple retail smaller mortgage where we’re just ticking the boxes.”
However, Anderson said the solution could still be to place the case with the high street, adding that “mainstream high street lenders are geared up pretty well to lend to high net worth clients, so it’s not always going to be a private banking solution and the cheaper terms generally are often with the high street bank.”
He continued: “But really, it’s just about asking a few more questions around the client – do they have more than one income stream, do they have any other assets that they can potentially use to repay the mortgage or to service the mortgage?”
Anderson also explained that working with private banks can involve traditional-style holistic underwriting and require an in-depth knowledge of the customer’s situation.
“Most private banks don’t have published criteria around what they are exactly seeking, so we go back to old-fashioned underwriting where the bank will take a holistic view based on the clients’ overall wealth position and incomes,” he added.
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Steady transaction levels will ‘set the tone’ for the year ahead – HMRC
The figure also represents a jump of 0.8% from the transactions in December 2018.
HMRC described the transaction levels seen as “stable”, and noted that year-to-date residential transactions for 2018-19 have been “at similar levels to previous years”.
Mike Scott, chief property analyst at online agent Yopa, suggested that these “stable” results would “set the tone” for the year as a whole.
“This level of activity is consistent with a steady market, neither booming nor crashing, so house prices should continue to rise slowly during the year, roughly in line with wage increases,” he concluded.
Jeremy Leaf, former residential chairman of the Royal Institution of Chartered Surveyors and a north London estate agent, argued that transactions are a better barometer of market sentiment than house prices, and said these numbers reflect what his firm has seen on the ground with cautious buyers and sellers reluctant about cutting asking prices.
He added: “There is no sign of any major corrections in the market, even though sales are harder to negotiate and taking longer to complete. Looking ahead, we do anticipate seeing more signs of release of pent-up demand when hopefully political and economic uncertainty reduces a little.’
More product flexibility
Jonathan Harris, director of Anderson Harris, argued that the market is “holding up remarkably well” given the political turmoil which is affecting the confidence of buyers and sellers alike. He suggested that some resolution to the Brexit question, one way or another, may finally persuade those who have delayed making a decision to go ahead with a purchase or sale.
“On the lending front, Swap rates have dipped on the back of suggestions that interest rates may be held or cut in the event of a no-deal Brexit in order to boost the economy. Lenders are already very competitive on rate so there is not much room for further reductions but we are seeing more flexibility on products instead, which is welcome.”
Higher purchase costs boost BTL as international clients ‘try before they buy’ – Investec
Investec Private Bank business development manager Peter Izard said he believed if people were committed to moving to the UK they would want to settle down before investing.
This was echoed by broker firm Anderson Harris which said it had seen clients taking this view.
Speaking on Mortgage Solutions Television in association with Investec Private Bank, Izard said: “The demand for property to rent in the high-end market is there.
“The long-term prognosis is that values will continue to rise over the longer term and for the right high net worth client in the right structure for their personal requirements the demand is there.”
He noted that this was particularly important for buyers potentially facing a top rate of stamp duty of up to 16% who would have even more reason to rent.
“That gives more credence to the fact that actually, if I’m committed to buying long term, I definitely want to try before I buy, because I want to make sure that the family is settled in a specific area,” Izard said.
He continued that the lender felt positive that “the long-term prognosis for high net worth buy to let is still strong, albeit there are some short-term headwinds”.
Anderson Harris director Adrian Anderson added that he had seen clients who had chosen to rent because it would be cheaper than their potential stamp duty bills.
Repossessions drop to lowest level since 1980
In total 4,580 homeowner possessions took place in 2018, the lowest figure since the 3,480 repossessions in 1980. However, UK Finance noted there are significantly more outstanding homeowner mortgages today, with nine million active accounts compared to 6.2 million back in 1980.
There were 77,610 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in the final quarter of 2018, a 5% fall from the same quarter of 2017.
On the buy-to-let front, 540 properties were repossessed in the final quarter of last year, down by 14% from the previous year, while there were 4,690 mortgages in arrears of 2.5% or more, which is unchanged from the same period of last year.
Jackie Bennett, director of mortgages at UK Finance, suggested that repossessions had fallen so low due to a combination of a low interest rate environment and lenders showing flexibility when working with borrowers who are in financial difficulty.
She continued: “Mortgage arrears also remain at historically low levels, with the majority of borrowers continuing to repay their mortgages in full and on time each month.”
Jonathan Harris, director of Anderson Harris, said it was encouraging that repossessions were at their lowest level in almost four decades, but warned there was no room for complacency, particularly with the potential for base rate rises ahead.
He continued: “We suspect that when it comes to their finances there are many people who don’t have a buffer to tide them over should they get into difficulty.”
Second charge repossessions stay low
Elsewhere, the Finance and Leasing Association announced that second charge repossessions in 2018 totaled 147, an increase of 8.1% on 2017.
However, the fourth quarter saw a sharp year-on-year fall in repossessions, down by 26.3% to 28.
The FLA emphasised that the number of properties repossessed during the year represented just 0.09% of the number of outstanding accounts.
Fiona Hoyle, head of consumer and mortgage finance at the FLA, said: “The low number of repossessions in the market shows that lenders are committed to helping those in financial difficulties. The sooner customers make contact, the easier it is to find a solution.”
Prime property market expanding with regeneration and hunt for yield – Investec
Investec Private Bank business development manager Peter Izard said people still gravitated to the areas of Chelsea, Knightsbridge, Belgravia, Mayfair and Kensington, but others seeing increasing demand.
Speaking on Mortgage Solutions Television in association with Investec Private Bank, he said: “Marylebone is very popular right now and is gaining popularity all the time.
“We see Crossrail as an absolute game-changer, and we see the ability to commute faster from outside of those prime postcodes.”
Izard also highlighted the major developments going on around Kings Cross as another driver for growth.
“So I think we’ll see the prime central London market remain where it is, but I think we’ll see growth as London expands and, dare I say it as people look for greater value as regeneration occurs,” he added.
Anderson Harris director Adrian Anderson echoed Izard’s comments and also noted that he was seeing clients heading further out of the prime central hotspots in search of yield for their investments.
High net worth clients need help navigating mortgage market – Panthera Finance
Tim Kemp, partner at the firm, highlighted that high net worth (HNW) clients such as entrepreneurs can be very time poor and so are therefore more reliant on good quality advice.
Speaking on Mortgage Solutions Television, Kemp (pictured) said: “A lot of clients are time poor so need help with navigating way through the mortgage market.
“They are quite often asset rich and cash poor, so being able to borrow allows them to not have to interrupt their cash flow.”
Investec Private Bank business development manager Peter Izard added that these clients were often keen to borrow to support themselves or their business’ growth.
“To you and I debt is a word we want to pay down,” he said.
“But if you’re a high net worth success or say you’re an entrepreneur – debt is not a dirty word. It actually allows you to leverage and allow you to meet your goals, both financial and business.”
Get tricky bits of cases out from the start – Anderson Harris
Anderson Harris director Adrian Anderson explained that particularly when dealing with high net worth individuals and private banks it was vital that all the details are clear from the start.
Speaking on Mortgage Solutions TV in association with Investec Private Bank, Anderson said: “Something I always do is If there’s going to be something which might be a bit tricky with the case then that always comes out at the beginning.
“You’ve got to be very upfront with the bank and then we go on to the nice bits.
“There’s no point glossing everything over and then three weeks later, something comes out that you know about, everything has to be said up front.”
The panel also noted that private banks take a more holistic view at client’s financial position than mainstream retail banks.
This can mean a much more in-depth relationship being built between the lender and borrower than brokers maybe typically used to.