First Homes scheme launches with seven lenders signed up
Chorley Building Society, Darlington Building Society, Halifax, Leeds Building Society, Mansfield Building Society, Nationwide Building Society and Newcastle Building Society have confirmed that they will be providing 95 per cent loan-to-value (LTV) mortgages for the scheme.
The scheme aims to help first-time buyers onto the property ladder with a minimum 30 per cent discount on market price on certain new builds. Prices for properties must not exceed than £250,000 outside of London, or £420,000 in Greater London.
This discount will also be passed on with the property sale to future first-time buyers, which the government says will benefit local communities and key workers, who can be prioritised for these homes.
The government scheme is part of plans to deliver one million homes by 2024.
This first batch consists of 12 First Homes on the market today in Bolsover, East Midlands.
Government is aiming to deliver a further 1,500 homes by the autumn and has said at least 10,000 homes a year could be delivered in the years ahead if there is sufficient demand.
The government also today launched a campaign, Own Your Home, which provides resources on options for home ownership including the government-backed schemes available to first-time buyers.
Andy Mason, head of housing development mortgages at Halifax, said: “As the UK’s largest mortgage lender, we are proud to support the First Homes initiative which will help first-time buyers – particularly those in some of the most valued roles in our communities – to get a foot on the housing ladder.”
He added that the scheme could lead to savings on the market price of up to £107,000 outside of London and £180,000 in London. First-time buyers using the scheme could pay £5,350 less on the deposit and save £536 a month on repayments, Mason said.
The saving is based on the differential of buying a property at 70 per cent of market price whilst taking a 95 per cent LTV with a 4 per cent fixed rate on 25 year repayment.
Nationwide’s mortgages director Henry Jordan said: “Deposits and affordability are the two major issues faced by all first-time buyers today, especially key workers who have played a vital role throughout the pandemic.
“This is why we are pleased to support the new First Home pilot, which aims to help them buy their first property.”
Newcastle Building Society’s chief executive Andrew Haigh added: “Home ownership can often feel out of reach for first time buyers – especially those without access to the bank of mum and dad.
“We’re committed to delivering innovative ways to help first-time buyers find affordable and sustainable ways to own their own home. We’re pleased to be one of the first lenders to support the scheme.”
Leeds Building Society’s CEO Richard Fearon said: “We’re pleased to be supporting the First Homes scheme, which aims to help people realise their dreams of owning their own home.
“Supporting schemes like this is a way to reaffirm our support for first-time buyers and other borrowers who are not well served by the wider market.”
House prices exceed record high with 8.2 per cent YoY jump – Halifax
Compared to last month, house prices were 1.4 per cent higher. The previous month-on-month, between February and March, was 1.1 per cent suggesting the stamp duty extension had fuelled growth.
On a quarterly basis, house prices grew by 0.9 per cent.
More highs to come
Nicky Stevenson, managing director at Fine and Country, said low interest rates, loosening Covid restrictions and homeowners saving money would encourage more activity.
She added: “Incredibly, the stage is set for this rally to continue and the market may be about to get its own vaccine bounce, like the one delivered to Boris Johnson this week.
“This won’t be the last record high we’ll see this year by a long stretch, and the figures next month will start to compare more impressively with the lull in growth caused by the first lockdown.”
Slowdown expected at year-end
Russell Galley, managing director at Halifax, said: “The influence of the stamp duty holiday will fade gradually over the coming months as it’s tapered out but low stock levels, low interest rates and continued demand is likely to continue to underpin prices in the market.
“However, we do expect recent levels of activity to be sustained over the short-term as buyers continue to search for homes with more space and potentially better suited for their new working patterns.”
He added: “There is growing optimism in the long-term outlook of the UK economy as the vaccination programme continues at pace, yet we remain cautious about the medium-term prospects of the housing market.
“As we said in March, the current levels of uncertainty and potential for higher unemployment as furlough support ends leads us to believe that house price growth will slow to the end of the year.”
James Forrester, managing director of Barrows and Forrester, said: “The UK property market is currently set to warp speed, make no mistake about it. We’re not just seeing a market recovering from last year’s pandemic paralysis, these current rates of house price growth are exceptional against any backdrop.
“With the fuel tank full to the brim, it’s likely that any natural correction to this explosive rate of growth will come many, many months after the stamp duty holiday deadline and the likelihood is, this current rate of growth will remain throughout 2021.”
Top ten mortgage broker stories – 16/04/2021
Meanwhile, experts say they expect interest rates to fall as demand for mortgages continues to rise and Hinckley & Rugby BS proved them right with a market-leading sub-one per cent discounted mortgage deal.
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Eager borrowers refusing to wait for mortgage guarantee scheme, say brokers
So far, Halifax and Santander are the only banks to announce details of their offerings which go live next week.
Other lenders are expected to launch their products over the next fortnight.
However, the lack of information in the six weeks since the scheme was announced has resulted in some brokers receiving little to no enquiries from borrowers who were ready to purchase.
Nik Mair, director of London Mortgage Solutions, said borrowers were not willing to wait.
“People are just going for what’s available now. Other lenders have come to market with 95 per cent LTVs so my clients have just been going for that.
“It’s not as if they’re getting a preferential rate and all the standard criteria still applies,” he said.
Dina Bhudia, managing director and chief executive of P2M Asset Management, said while the scheme gave other lenders the confidence to return to the low market, she questioned whether it was needed as her clients were preferring to raise their equity instead.
She said: “I’ve personally had no-one ask me about the mortgage guarantee. Probably because a lot of my cases are vanilla and people are resorting to the bank of mum and dad.
“So, they have larger than five per cent deposits.”
Christopher Hall, mortgage adviser at Mortgage Guardian, said it also came down to properties not fitting the criteria of the scheme as many first-time buyers were going for ineligible new-build properties.
With borrowers seemingly showing no interest, Hall predicted this could be because they were planning to go directly to the banks once more details revealed as they felt comfortable approaching the household names.
He said: “Perhaps this is a disadvantage for brokers as a lot of customers will know the main lenders subscribing to the scheme and go direct instead of through a broker.
“I don’t think the publicity is so high for the other 95 per cent LTV products. It is on social media with the broker community, but I don’t think public awareness is quite well known.”
Mortgage guarantee future
Bhudia and Mair said the uncertainty of what the scheme might look like for mortgage holders in the future also made them unwilling to suggest it to borrowers without more information.
Bhudia said she would rather wait to see the small print to work how it might affect borrowers 30 years down the line.
Mair echoed these sentiments and said there was no point in telling a client to hold off if a property had been decided upon and other options were immediately accessible.
“At least that way there’s no further complications about how it’s backed because we don’t have enough information and can only advise on the products that are available to us,” he added.
Mitul Patel, mortgage adviser at Lemon Tree Financial, was also wary of the initiative.
He said: “They’re commercial organisations at the end of the day and it still has to be beneficial for them. No one gives away something for nothing.”
In contrast to other broker experiences, Mitul Patel, mortgage adviser at Lemon Tree Financial, noted that there was sustained interest in the scheme, with clients continually calling about it since the day after the announcement.
He said he was spending time trying to calm them down and remind them there was not yet enough information. He also said certain clients seemed to have high expectations of what they would be able to borrow, with some looking at properties worth £750,000.
Patel added: “I think the messaging and the fact it was announced by the government made it sound appealing. So, I’ve tried to manage expectations and say be prepared to not qualify.
“Some think it’s 95 per cent on anything they want to buy. A lot of people are looking forward to this. My advice is to let it settle down, see what comes out next week and see your options thereafter.”
Halifax launching 95 per cent LTV deals next week and cutting rates
On 19 April it will go live with two-year and five-year fixed products for first-time buyers and home movers with a five per cent deposit.
There are £999 fee and fee-free versions of each product – the two-year fixes are at 3.73 per cent and four per cent respectively with the five-year options at four per cent and 4.2 per cent each.
Mortgages are available on a repayment basis only and are for loans between £25,000 and £500,000.
A maximum 4.49 times loan to income cap will be applied as part of the affordability assessment.
Current credit commitments will be deducted as ongoing in the affordability calculation even when declared as ‘to be repaid’ at or before completion, and the loan amount must be affordable with these commitments deducted as remaining.
Rate cuts and withdrawals
The lender is also updating its wider residential mortgage offering at the same time.
Selected rate reductions of up to 0.35 per cent are being made across its 60 per cent LTV band on two, three and five-year fixed rate first-time buyer, home mover and new build deals.
Among these, the two-year fixes with £1,499 fee and £999 fee for home movers and first-time buyers are being trimmed to 1.1 per cent and 1.11 per cent respectively.
The five-year versions will be reduced to 1.24 per cent and 1.28 per cent.
For new-build properties, the two-year fix with £999 fee is at 1.31 per cent, the three-year at 1.4 per cent and the five-year at 1.48 per cent.
Halifax is also withdrawing its two and five-year fixes at 60 per cent LTV for loans of more than £1m.
Top ten mortgage broker stories this week – 09/04/2021
Elsewhere, TSB raised its maximum age, more 95 per cent LTV mortgage choice hit the shelves and a thought-provoking feature on mental well-being revealed a quarter of brokers responding to our latest poll were struggling in some way to cope with the stresses of the pandemic.
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Halifax overhauls mortgage criteria for all non-UK national applicants
Many lenders have been making changes to rules for European Economic Area (EEA) nationals but Halifax is applying these to non-European citizens as well, meaning all international applicants will have to meet the same criteria.
Where all applicants have lived in the UK for more than five years, or the loan to value (LTV) is less than or equal to 75 per cent, or where the applicants’ income is at least £100,000, no permanent right to reside will be required.
When proof of permanent right to reside is required for any applicant, advisers must provide it for all customers on the application.
To determine if a customer has lived in the UK for more than five years Halifax will use credit reference agency data but may still require proof of residence for more than five years.
Application income will include both incomes on a joint application and is the total of basic, overtime, bonus and commission for employed applicants or the latest year’s income for self-employed customers, plus pension income.
“This new simplified criteria applies a consistent approach for both EEA and non-EEA customers and will make it easier for you to know in advance if an application will be accepted,” the lender said in a message to brokers.
The new criteria applies to all full applications submitted from 8 April 2021 and new further advance applications.
Any decision in principle (DIP) keyed before this date but then submitted as a full application from 8 April will also be subject to the new criteria.
Permanent right to reside can include:
- As part of the EU Settlement Scheme EEA, EU and Swiss citizens, living in the UK by 31 December 2020 can apply to continue to live in the UK after 30 June 2021 and will receive one of two statuses which are both acceptable:
- Settled status (awarded where they have lived in UK for at least five years and also known as ‘indefinite leave to remain under the EU Settlement Scheme’).
- Pre-settled status (awarded where lived in the UK for less than five years and they can re apply for settled status after five years continuous residence in UK has been reached).
- Indefinite leave to enter or remain.
- Republic of Ireland citizens do not need to apply under the EU Settlement Scheme and have automatic permanent right to reside in the UK.
Changes are coming: Esther Dijkstra, MD Intermediaries Lloyds Banking Group
From 1 January, Dijkstra took over from Mike Jones as managing director Intermediaries for Lloyds Banking Group looking after the Halifax, BM Solutions and Scottish Widows brands.
But the landscape couldn’t be more different to the one Jones had known. Inside of 12 months, the mortgage industry, used to working in busy offices, meeting at events, and driving miles to see clients and brokers moved online. The bank’s staff were forced to work from home and new mortgage lending for the entire market fell 10 per cent.
And as the pandemic brought some sectors like travel and hospitality to a standstill, other sectors which were able to transfer online have thrived. But that polarisation has made assessing mortgage risk much harder than it previously was before.
“The impact the pandemic has had on borrowers’ livelihoods and earnings has added an extra layer of complexity to lending when you also have to take into account furlough schemes and payment holidays, for example,” says Dijkstra “And because it is a health crisis and not a financial crisis, some sectors have been more heavily impacted than others.”
Combined with the reality that banks too had to turn their staff into home workers and move online meant Lloyds was juggling operational challenges at the same time as adapting its criteria to reflect new risks. More underwriters were recruited to deal with complex borrower circumstances.
“It’s been tough for us as well, but we have bounced back quickly to delivering the service and expectations that brokers have,” Dijkstra says.
Lloyds Banking Group will not release its new lending figures, but in the context of the market’s 10 per cent drop in lending, Dijkstra says the bank has “done very well”.
“As an industry we should reflect back on last year and think, wow we did all of that. We did all come through it and we worked together; valuers, estate agents, risk people, everyone.
“Everybody was flexible. It’s something to be proud of as industry, we managed to serve customers when the market closed and then when it opened back up again.”
The stamp duty holiday
Stamp duty is currently still driving the mortgage market forward at top speed, but Dijkstra has her eye on plenty of market-supporting initiatives that will keep lending buoyant when the scheme begins to taper off in June.
Her key focuses for 2021 are supporting first-time buyers, building momentum behind their equity release products and addressing the operational challenges and new ways of working brought about by the pandemic.
From mid-April, 95 per cent deals will be back on the shelves and Lloyds is one of five lenders that have committed to offering the mortgages.
“One of the biggest difficulties for first-time buyers is getting a deposit and 95 per cent is a big way of supporting them.” Dijkstra wouldn’t say if Lloyds had any direct involvement with bringing about the government-backed mortgage guarantee scheme that was announced in the Chancellor’s Budget. But she did say the bank lobbies government on behalf of the mortgage and housing market.
Higher LTV lending
The market is hoping that further support for first-time buyers will come in the form of higher loan to income multiples. This will mean those who need help the most are able to make use of the 95 per cent deals. Dijkstra wouldn’t confirm if enhanced multiples would be made available, except to say criteria was kept under constant review. Rates for the range are also still under wraps.
Another product range that the market can expect to see more of this year, says Dijkstra, is equity release mortgages through the Scottish Widows brand.
“There is a clear customer need here. People want to support their children on to the housing ladder, they are equity rich but cash poor. It’s a really good opportunity area not just for us, but for brokers too. As their customers get older they need to be able to help with ‘at retirement’ borrowing options.”
The plan is to scale up their equity release operation this year, using their business development managers to spread the word through brokers. Dijkstra is determined to grow the distribution of equity release mortgages in the mainstream mortgage market, and says it is currently too narrow and reliant on “two main distributors”.
“Our reasons for entering the market are to address customer and regulatory concerns and offer the flexibility that’s being asked for.
“But you have to be in the market to support that change. I think about it terms of swimming, you can read books about it and watch people doing it but unless you are in the water and you start to swim, you won’t be able to do it and you will drown.”
A huge operational challenge for Dijkstra is to decide which parts of Lloyds’ lockdown working life will remain, and which will return to pre-pandemic norms and how the bank interacts with brokers is a major focus.
With the vaccine roll out in progress, her team has started to look at new ways of working. They want to find how the way in which customers and brokers want to interact with the bank has changed bearing in mind the national mood that a work/life balance is more of an expectation now rather than an aspiration. Behind the scenes they are already experimenting with new approaches.
Dijkstra says the bank is already reviewing the number of offices it has and whether they will still be needed and she is sure other companies in the mortgage sector will be doing the same.
“We have a brilliant opportunity to redesign how we work and to do it from everyone’s perspective, the broker, the BDM, the national account manager, networks and mortgage clubs.”
One role destined for long-term change is the BDM.
“When I practically think about BDMs, do I think that we will all jump back in the car and get on the road, no. There will definitely be a hybrid [solution].”
She says it’s difficult to design how the job role will look on paper so it will be a case of trying new ways and finding out what works best.
For now, Dijkstra and the intermediary team will be working full throttle to support brokers and borrowers as the stamp duty extension prolongs the mayhem for a few more months. But as the bank crosses the half year line, mortgage brokers can expect to see much change across Lloyds’ trio of brands.
House price rises continue to cool in February – Halifax
Having seen five months of consecutive strong growth in 2020, this is the third month of easing, with prices coming down slightly from the high of 252,890 in November.
However, on an annual basis prices are still 5.2 per cent higher than the £239,414 in February 2020 before the pandemic hit.
The results are somewhat of a contrast to those from Nationwide Building Society published earlier this week, which showed a 0.7 per cent increase in house prices in February after a January pause.
Halifax managing director Russell Galley welcomed the stamp duty holiday extension which “has removed a great deal of uncertainty for buyers with transactions yet to complete”.
And he approved of the 95 per cent loan to value mortgage guarantee scheme also announced in the Budget.
“While mortgage approvals have reached record highs in recent months, hitting levels not seen since before the financial crisis of 2008, raising a deposit continues to be the single biggest hurdle for first-time buyers to overcome,” he said.
Galley noted the housing market had been at a crossroads to start the year, with upcoming events such as the Budget key to determining the path of activity and prices.
“Having enjoyed an extremely strong period of activity in the second half of last year, the housing market continued its softer start to 2021, with average prices down very slightly compared to January,” he said.
“However, with annual house price inflation currently at 5.2 per cent, property values remain comfortably higher than 12 months ago, when February was the last full month before lockdown.”
Industry commentators expect the Budget announcements to reinvigorate the market and prompt more buyers and sellers to return in the short term.
Former Royal Institution of Chartered Surveyors residential chairman Jeremy Leaf said: “The slight softening in house prices contrasts with those from Nationwide earlier in the week.
“It shows the market pausing in February as many buyers and sellers were deterred by the prospect of not being able to take advantage of the stamp duty holiday, as well as being hampered by further lockdown restrictions.
“However, when it became clear from Budget leaks that there was a good chance of the concession being extended and further support for higher loan to value mortgages, the market perked up and gained in confidence, even though the extension is relatively short.”
MT Finance commercial director Gareth Lewis noted that it was a sustainable slowing, rather than values falling off a cliff.
“There is still a desire to transact and if people are less likely to pay over the odds, then all the better,” he said.
“The stamp duty holiday extension should help that trend. Price growth is great as far as capital appreciation is concerned for investors but it is hard for those trying to get on the housing ladder.
“As those trying to buy a home may have been furloughed for a time, we can’t live in a price bubble for too long.
“The 95 per cent mortgages announced in the Budget are a positive as they will help stimulate the market, encouraging first-time buyers which allows further transactions to happen up the ladder,” he added.
Not sustainable throughout 2021
In the longer-term, Galley highlighted that the performance of the housing market remains inextricably linked to the health of the wider economy.
“The pace and extent of recovery are still highly uncertain, and much will depend on the ongoing success of the UK’s vaccination roll out,” he continued.
“Though there is the likelihood of an economic bounceback from lockdown, with households not unduly impacted by the pandemic deploying the significant reserves of savings that they have built-up, higher unemployment is likely to limit new buyer demand.
“Therefore, we would not expect the level of growth seen in house prices over the past year to be sustained throughout 2021.”
NatWest and Halifax cut rates; Platform caps maximum LTI – round-up
Two-year fixed purchase mortgages have seen rates cut up to 10 basis points. The fee-free product at 85 per cent loan to value (LTV) has dropped from 2.93 to 2.83 per cent. The fee-free offering at 90 per cent LTV has decreased from 3.48 to 3.43 per cent.
Remortgaging borrowers fixing for two years have seen rate reductions. These include the £0 fee product at 75 per cent LTV, on which rates have reduced by 11 basis points to 1.78 per cent.
At 90 per cent LTV, two-year fixed remortgages have seen cuts of 0.15 per cent to, respectively, 3.24 per cent and 3.44 per cent for the £995 paying and fee-free products.
For borrowers fixing for five years, the fee-free purchase product at 85 per cent LTV has been cut to 3.07 per cent from 3.15 per cent.
Brokers wanting to secure current rates have until 10.30pm tomorrow to produce mortgage illustrations and submit applications online. If brokers are unable to submit applications due to technical issues that cannot be resolved over the phone, they must submit a paper application and email their business development manager by midday.
Platform caps maximum LTI
Platform has reduced the LTV its maximum income multiplier can be considered for from 75 per cent LTV to 70 per cent LTV.
Borrowers requiring loans up to the threshold can borrow up to 4.85x their income while anyone with requirements above 70 per cent LTV and those using Help to Buy will have borrowing capped at 4.49x their income.
The change applies to applications submitted from 1 March.
Platform has re-introduced its Help to Buy mortgages at 60 per cent LTV and 75 per cent LTV with two and five-year fixes.
All products have £500 cashback and free valuations. At 60 per cent LTV, rates for both two and five-year fixes with a £999 fee are 1.79 per cent. At 75 per cent LTV, rates are 1.95 per cent.
For fee-free Help to Buy products, rates are 2.02 per cent at 60 per cent LTV and 2.2 per cent at 75 per cent LTV.
The lender has also relaunched fee-free mortgages at 60 and 75 per cent LTV, with two- and five-year fixes.
Elsewhere, Platform has reduced rates on residential, professional and mainstream mortgages by up to 0.12 per cent. Product switches for residential and buy-to-let mortgages have seen rate hikes of up to 0.19 per cent.
Halifax and BM Solutions
Halifax has reduced rates on remortgages.
Meanwhile Lloyds Banking Group’s buy-to-let brand BM Solutions has increased the rate of a five-year fixed at 75 per cent LTV with a £999 fee. The product transfer now has a rate of 2.21 per cent.