Halifax launches new build 95 per cent LTV loans

Halifax launches new build 95 per cent LTV loans

 

This has dropped the minimum deposit required from 10 per cent to five per cent and brings the maximum LTV in line with existing properties. Changes will apply from 1 July.

At the same time, LTVs on housing association shared ownership mortgages have been increased to 95 per cent.

The lender said it is also extending availability to homes by smaller housing developers, opening it up to over 2,000 SMEs.

In a statement, the lender said pulling together a sufficient deposit is often the biggest hurdle for first-time buyers.

The average UK house price stands at £289,099 meaning savers need to find thousands of pounds before they are able to buy their first home.

Halifax’s change comes as the government prepares to withdraw Help to Buy which offers borrowers the chance to buy a new-build home with a small deposit.

Lenders have typically excluded new builds from the highest LTVs.

Andrew Mason, head of strategic partnerships and housing, at Halifax, said: “We recognise that getting a deposit together is still the biggest hurdle faced by most first-time buyers, and these changes could reduce the minimum deposit required on an average house to as little as £4000.”
“This also underlines our confidence in the new build market and our support for the UK construction industry. We have worked closely with the industry and listened to their needs to develop these changes.
“Just as importantly, supporting new build homes supports the drive to net zero by making warmer, greener homes more accessible and attainable for potentially thousands of new buyers.”

Housing affordability falls to lowest level on record – Halifax

Housing affordability falls to lowest level on record – Halifax

 

According to Halifax, during the first quarter of 2022 the average price of a home in the UK was £279,431 while the average salary was £39,402. This put the house price to income ratio at 7:1 which is the highest, or least affordable, recorded. 

This means average house prices are now worth seven times more than the average person’s earnings. 

In comparison, at the start of 2020 average UK earnings were £38,374 and the average house price was £239,281, making the house price to income ratio 6.2 times earnings. 

Since then, house prices have risen by 16.8 per cent while wages have increased by 2.7 per cent. 

 

Market activity strong 

Although the average UK property is at its most unaffordable, activity in the market has remained healthy. Halifax said this suggested people were making “the numbers work for their circumstances”. 

For example, people are submitting joint applications and boosting affordability through the second income, while others have benefitted from the increasing value of their current home and the equity that provides them. 

Additionally, first-time buyer numbers rose at a record rate last year with a 35 per cent increase to 409,370. This was an all time high. 

 

First-time buyer struggle 

While the first-time buyer affordability ratio is not as tight at 5.6 times earnings, compared to home movers at 8.5 times earnings, this was also constrained because of the pandemic price surges. 

Halifax said this put pressure on the “challenge of raising a suitable deposit” without the advantage of an increasing value of an owned property. 

However, first-time buyers are also making do with joint applications or by drawing on other sources of funds such as the bank of mum and dad. 

Also, because the average age of a first-time buyer is now three years older than it was a decade ago at 32, they are more likely to be established in their careers and thus have higher earnings. 

 

Regional variances 

While London has not seen the same growth in house prices that other parts of the UK have with a 5.9 per cent uptick, the English capital still has the most expensive homes with properties worth 9.7 times average earnings. 

This is followed by the South East where house prices are 9.3 times earnings and the East of England where this is 8.5 times earnings. 

The North of England is the most affordable region with an income ratio of 4.6. 

Andrew Asaam, mortgages director at Halifax, said: “There’s no question that the economics of buying a home have changed significantly over the last couple of years. Soaring property prices and slower wage growth have combined to stretch traditional measures of housing affordability. 

“However, we also know from strong transaction levels that demand has remained extremely strong over that period, both from home movers seeking bigger properties, and first-time buyers taking their first steps onto the ladder.” 

He added: “With interest rates on the rise as a means of combatting inflation, it’s unlikely that house prices will continue to grow at the pace we’ve seen recently. This should see the gap between average earnings and property prices narrowing over time.  

“It’s also important to highlight the responsible approach taken to mortgage lending in this environment, with lenders conducting thorough checks to ensure repayments are manageable even if interest rates rise more sharply in future.” 

Halifax and Clydesdale Bank increase rates – round-up

Halifax and Clydesdale Bank increase rates – round-up

Halifax’s rate changes apply from Friday 24 June, with increases of as much as 0.50 per cent. 

House purchase, remortgage, shared equity and green products fixed for up to 10 years have been amended. 

Rates on home buyer mortgages now begin at 3.24 per cent at 0 to 60 per cent loan to value (LTV) for a two-year fix with a £999 fee, up to 3.86 per cent at 90 to 95 per cent LTV with no fee. 

Five-year fixed equivalents range from 3.33 per cent at 0 to 60 per cent LTV, to 4.14 per cent at 90 to 95 per cent LTV. 

For remortgagors, a two-year fix at 0 to 60 per cent LTV with a £999 fee is priced at 3.33 per cent, while the fee-free option at 85 to 90 per cent LTV has a rate of 3.74 per cent. 

Five-year fixed options start from 3.39 per cent at 0 to 60 per cent LTV, to 3.81 per cent at 85 to 90 per cent LTV. 

 

Clydesdale Bank ups select rates

Clydesdale has increased rates across its core, £1m, professional and buy-to-let mortgages. 

Rates for core products between 65 to 95 per cent LTV, fixed for either two or five years, have risen by up to 0.35 per cent. 

For mortgage loans of over £1m between 65 and 85 per cent LTV, fixed for two or five years, rates have gone up by as much as 0.30 per cent. 

Professional and newly qualified professional mortgage rates have increased by up to 0.21 per cent. 

Across its buy-to-let offering, two and five-year fixes will see rate rises of 0.40 per cent. 

Changes will apply from tomorrow. 

Top 10 most read mortgage broker stories this week – 10/06/2022

Top 10 most read mortgage broker stories this week – 10/06/2022

Halifax’s latest house price report pegging annual growth at 10 per cent and indicating a slowdown, as well as analyses around the buy-to-let market and four-day working weeks also piqued readers’ interest.

Boris Johnson to extend Right to Buy and allow housing benefit for mortgage payments – reports

Johnson launches mortgage market review and confirms Right to Buy extension and benefit changes

Specialist lenders and building societies are shaking up the BTL market – Armstrong

Lenders should improve withdrawal process and work with brokers – Simpson

Buy-to-let market may be shifting, but it isn’t broken, say brokers

 

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Annual property price growth over 10 per cent but signs of market slowdown – Halifax

How a four-day week for busy mortgage advisers with no downsides might work

 

Mortgage activity falls in Q1 but market expected to ‘remain relatively robust’ – UK Finance

Halifax ups select rates by 0.6 per cent

Halifax ups select rates by 0.6 per cent

The lender has increased its two-year fixed rate large loan remortgage product up to 60 per cent loan to value (LTV) by 0.6 per cent.

The product, which is eligible for loans between £1m and £5m, is now priced at 2.75 per cent and comes with a £1,499 fee.

For homebuyers, the rates for its two, five and 10-year affordable housing products, which cover shared equity and shared ownership, have risen by around 0.36 per cent.

Its two-year fixed rate at 60 per cent LTV with a £999 fee now stands at 2.84 per cent, whilst its five-year fixed rate is priced at 2.93 per cent.

Annual property price growth over 10 per cent but signs of market slowdown – Halifax

Annual property price growth over 10 per cent but signs of market slowdown – Halifax

 

According to the Halifax’s house price index, it is the eleventh month of consecutive increases, but the pace of growth has begun to slow.

At the start of the year annual house price growth was 9.7 per cent, rose to 11.2 per cent in February and then started falling from March to 11.1 per cent then 10.8 per cent in April.

Monthly house prices have gone up by one per cent, or £2.857, which compares to 1.2 per cent in April and 1.5 per cent in March. In May last year the monthly price change was 1.3 per cent.

The report added that homebuyers would need £10,000 more to buy a flat than they did last year, and a further £50,000 to buy a detached home.

Regionally, nine regions in the UK reported double-digit annual growth, barring Yorkshire and the Humber and London which recorded single-digit growth.

Northern Ireland reported the strongest house price growth at 15.2 per cent, with average house prices emerging at £185,386.

This was followed by the South West at 14.5 per cent, with average house prices of £305,173, and Wales at 13.7 per cent, bringing average prices to £216,120.

London recorded the lowest annual growth at 6.3 per cent, but average house prices were the most expensive at £541,942.

Overall, the average cost of a home rose by 74 per cent, or £123,016 over the past decade, with the strongest growth coming from London at 84.2 per cent, the East of England at 84 per cent and East Midlands at 82.1 per cent.

This means homebuyers in London now need £247,638 more than a decade ago, those in the East of England require £153,930 more and buyers in the East Midlands need £108,116 more.

Russell Galley, managing director at Halifax, said that whilst annual growth remained in double digits, it was the slowest rate of growth since the start of the year.

He added that the “imbalance between supply and demand” for properties was the main reason for the climb in house prices.

Galley said: “The housing market has begun to show signs of cooling. Mortgage activity has started to come down and, coupled with the inflationary pressures currently exerted on household budgets, it’s likely activity will start to slow.

“So, there is perhaps one green shoot for prospective purchasers; with overall buying demand down compared to last year, we may be past the peak sellers’ market.”

 

Market showing signs of slowdown

Tomer Aboody, director of property lender MT Finance, said that the report showed that the market had been reporting month-on-month growth for nearly a year, which was “fuelled by eager buyers looking for more space, while taking advantage of the low interest rate environment”.

He noted that the fact that house prices had risen by 74 per cent in the past decade showed how much the market was running away from first-time buyers.

“With many years of record low interest rates, buyers have been unwittingly pushing up prices due to lack of supply, taking on bigger mortgages to afford more expensive homes,” he explained.

Aboody noted that as mortgage rates were going up with inflation, a slowdown was evident and buyers were less confident about stretching themselves, especially for properties that needed work. This was also partially due to rising costs of material and labour.

Conor Murphy, chief executive of Smartr365, said that 11 months of consecutive house price growth should “put to bed many of the worst fears consumers, commentators and industry professionals have about the health of the market”.

However, he said that the cost of living crisis, as well as looming recession, meant that predictions about the property market should be more “realistic”, as historic house price growth and current transactions could only be sustained for so long.

Murphy added: “Advisers should take advantage of this period of growth to make certain that the homebuying process is as smooth as possible. Efficiency will likely be critical later in the year as interest rates look likely to rise and as transaction numbers begin to level off.

“It is vital that the groundwork is laid now before it’s too late. Investing in mortgage tech will enable brokers to process mortgage applications quickly and efficiently whilst leaving advisers with the capacity to provide the industry expertise clients come to them for.”

 

Lenders’ need to make ‘clear and considered assessments’

Steve Griffiths, sales director at The Mortgage Lender, said that “spiralling inflation, rising living costs, and plunging consumer confidence” was setting the scene for a market slowdown, which was illustrated by buyer demand faltering due to affordability.

He said: “With the rising cost of living showing no signs of abating, it’s important lenders are making clear and considered assessments based on individual’s situations.

“For those looking to set foot on the housing ladder or remortgage, it’s essential they shop around, looking beyond traditional lenders who may offer alternative options that might better help support their property ambitions.”

 

Lender criteria needs ‘careful thinking’ to be more sustainable – Halifax Intermediaries video debate

Lender criteria needs ‘careful thinking’ to be more sustainable – Halifax Intermediaries video debate

 

Speaking on a Mortgage Solutions video debate in association with Halifax Intermediaries, Mason said that additions to homes, like solar panels, have “tended to create problems from a valuation perspective”. 

Not all lenders will currently lend on a property with leased or rented solar panels. Those who do consider it require further detail around financial responsibilities, such as whether the panels will be considered part of the property within the sale, or seen as the previous owners’ property in a similar vein to furniture. 

Mason believes attitudes toward greener renovations need to be changed. He added: “They’re viewed quite negatively, and I think if we are genuinely to drive a sustainable agenda, we need to think carefully about our lending criteria on things especially like solar panels. They need to be viewed more positively.  

“We want more people to do this, so they are energy self-sufficient. If our lending doesn’t catch up with sustainable activities and sustainable improvements, that’s going to be a problem.”

 

 

The advice process 

Kevin Roberts, director of Legal and General Mortgage Club, said conversations around a property’s energy efficiency tend to occur later on in the advice process. 

However, he said that was shifting, saying: “What we’re seeing is the property risk coming much more to the fore of the research journey.” 

Roberts believes that working towards energy efficiency presents a “real opportunity” for brokers, especially those with landlord clients who are up against the EPC deadline to improve the sustainability of rental homes. 

He added: “I’ve seen real innovation with some of our firms around using these kinds of messages to keep abreast [of energy efficiency] while a customer is in a five-year fixed, and to keep those marketing messages coming.” 

 

Watch the video embedded [8:10] hosted by Shekina Tuahene, commercial editor at Mortgage Solutions, featuring Andy Mason, head of strategic partnerships and housing at Lloyds Banking Group, Bukky Bird, group sustainability director at Barratt Developments and Kevin Roberts, director of Legal and General Mortgage Club.   

 

Sponsored content in association with Halifax and Lloyds Banking Group. For Intermediary Use Only 

Lenders have made a good start with green mortgages – Halifax Intermediaries video debate

Lenders have made a good start with green mortgages – Halifax Intermediaries video debate

Speaking on a Mortgage Solutions video debate in association with Halifax Intermediaries, Roberts said:  “I think lenders have made a really good start in terms of innovation, but there’s a really long way to go. 

“We now need to start demanding from lenders that we get much more focus on that. It’s not just a discount for A to C, whilst that’s nice, it’s not necessarily helping the issue.” 

 

He suggested that there needed to be help available so people could improve their home’s EPC rating and get the finance for it. 

He added: “Maybe we can be more creative around affordability measures if it’s for green [mortgages].  

“Maybe we can have much more cashback, maybe we can have more marketing. Some consistency, maybe, from the lenders would be really helpful. Education is always good – if lenders could collaborate a little bit more.” 

Bukky Bird, group sustainability director at Barratt Developments, said “the dream” was for every conversation a homeowner had about financing their home to consider the benefits of being energy efficient. 

She also proposed the idea of “genuinely impactful financial products” which factor in the savings that can be made when making a home more efficient. 

Andy Mason, head of strategic partnerships and housing at Lloyds Banking Group, said he wished to continue having “great” and “practical” conversations around green mortgages. 

He said Halifax was working on improving the quality of its backbook from an average EPC rating of D to C. 

He also said the bank was looking at piloting products to encourage people to retrofit their homes and improve energy efficiency. 

 

Watch the video embedded [7:01] hosted by Shekina Tuahene, commercial editor at Mortgage Solutions, featuring Andy Mason, head of strategic partnerships and housing at Lloyds Banking Group, Bukky Bird, group sustainability director at Barratt Developments and Kevin Roberts, director of Legal and General Mortgage Club.  

Sponsored content in association with Halifax and Lloyds Banking Group. For Intermediary Use Only 

Mortgage sourcing system assistance can support sustainable lending – Halifax Intermediaries video debate

Mortgage sourcing system assistance can support sustainable lending – Halifax Intermediaries video debate

 

Speaking on a Mortgage Solutions video debate in association with Halifax Intermediaries, Mason said: “We need to encourage broader participation of things like sourcing systems so brokers can easily source products that are helpful for sustainable lending.” 

Overall, he praised the housing sector for being innovative with respect to meeting its green targets. 

Mason added: “There’s so much activity to try and understand what the house of the future needs to look like. It’ll be fascinating to see how it evolves – for example, what kind of heating systems do future homes need? 

“Modern method of construction (MMC) homes are rapidly evolving. The big benefits there are the energy bills in these MMCs can be much smaller because they’re engineered in the factories to be highly efficient.” 

Mason said more could be done however, and although lenders have created products to offer cashback or lower rates to borrowers retrofitting their homes, other means to encourage and promote energy efficiency could be utilised. 

“For example, capturing EPC in the mortgage journey is going to be essential for the future, and then you can start to think about reflecting genuine affordability,” he added. 

Kevin Roberts, director of Legal and General Mortgage Club, said the industry was doing well to think about its impact on the climate and environment on a broader scale. 

He added: “Even if it’s having electric cars, putting things on their [company] website, offsetting [the mortgage process] by planting trees, people are starting to think about this and that’s because our consumers are.” 

Bukky Bird, group sustainability director at Barratt Developments, said not enough steps have been taken to encourage borrowers to reach a level which was needed, but suggested financial products which factor in a customer’s monthly savings could help. 

She added: “I think we probably need bolder partner engagement; I think we need to just do some things. Just trial some things, get out there, not wait for every single thing to fall into place.” 

 

Watch the video embedded [8:51] hosted by Shekina Tuahene, commercial editor at Mortgage Solutions, featuring Andy Mason, head of strategic partnerships and housing at Lloyds Banking Group, Bukky Bird, group sustainability director at Barratt Developments and Kevin Roberts, director of Legal and General Mortgage Club.

 

Sponsored content in association with Halifax and Lloyds Banking Group. For Intermediary Use Only

EPC ratings are not yet ‘future fit’ – Halifax Intermediaries video debate

EPC ratings are not yet ‘future fit’ – Halifax Intermediaries video debate

 

When asked if all new build homes should be built to an EPC rating of A or B, Bird said yes but challenges remain. 

She said the Future Homes Standard was helping housebuilders address this, but a firm roadmap with more detail was needed. 

The Future Homes Standard requires all new-build homes to be developed with low carbon heating and to be energy efficient by 2025. 

Andy Mason, head of strategic partnerships and housing at Lloyds Banking Group, said the new build sector was well placed to benefit from the green revolution. He also said house builders were at the forefront of driving toward more efficient goals. 

However, he agreed that there were challenges with building homes to an A or B rating due to issues with the current EPC framework. 

“When we’re testing out new technology like air source heat pumps, the EPC framework doesn’t work perfectly today for the technology of the future,” he added. 

Air source heat pumps are not currently recommended to improve a home’s EPC rating because the methodology calculates how much the cost of fuel would be for each square metre of a home. 

As electricity is more expensive than gas, air source heat pumps often lead to a home’s energy efficiency rating being downgraded, despite them being a more efficient way of providing heat. 

Mason said: “There’s a potential that today the Future Home Standard on the basis of the EPC framework may actually not look like a highly-rated efficient product.” 

Bird agreed and said this highlighted the scale of the challenge as there were many things which still needed to be lined up. 

She added: “Whilst broadly, we’re in support of EPCs, we know that they really need to be fixed. They’re not yet future ready, they’re not yet future fit.” 

Regarding existing housing stock, Kevin Roberts, director of Legal and General Mortgage Club, said advisers were at the start of the journey but the messages being delivered by policymakers were still “a little bit muddled”. 

He added: “Our regulation is for mortgage advice, it’s not for green advice so we have got to understand what is our role. We’ve got to make sure we don’t venture into advice that either we’re not able to give or that might come and bite us in a few years’ time.” 

Mason said it was also about convincing people in lower-rated homes that it was better to spend their money on renovating a home to make it greener rather than refurbishing a room. 

 

Watch the video embedded [8:37] hosted by Shekina Tuahene, commercial editor at Mortgage Solutions, featuring Andy Mason, head of strategic partnerships and housing at Lloyds Banking Group Bukky Bird, group sustainability director at Barratt Developments and Kevin Roberts, director of Legal and General Mortgage Club.

 

Sponsored content in association with Halifax and Lloyds Banking Group. For Intermediary Use Only