Posts filed under ‘Finance’
The number of people out of work continued to fall during the first part of the year, providing a further boost to the housing market.
Unemployment dropped by 77,000 during the three months to the end of February, compared with the previous quarter, as the UK’s economy continued to recover.
There was also a 1.7 per cent jump in pay and bonuses during the three months, compared with a year earlier, according to the Office for National Statistics.
The rise marked the first time that pay growth has outstripped Consumer Price Inflation since the three months to April 2010, meaning wages are once again rising in real terms.
The figures are good news for the property market, with house prices traditionally rising during periods of high employment, as people feel confident about moving up the property ladder.
High levels of employment also mean people are less likely to be forced to sell their homes or have them repossessed because they are struggling to pay their mortgage after losing their job.
Overall, the ONS said a total of 30.39 million people were employed in the three months to February 2014, 691,000 more than during the same period a year earlier.
There was also an increase in the total of weekly hours worked, with this measure rising to 973 million during the three months.
The number of people who were unemployed dropped to 2.24 million, 77,000 lower than in the previous quarter and 320,000 below the figure for a year earlier.
The fall pushed the unemployment rate down to 6.9 per cent of the labour force, compared with 7.9 per cent a year earlier, but still above the level of 5.2 per cent seen in late 2007/early 2008.
Rising employment and lower inflation helped households’ optimism about their financial situation reach a record high during April.
The Markit Household Finance Index climbed to its highest level during the month since the survey was first launched in February 2009.
The group’s workplace activity measure and job security index were also both at or close to record highs, while household spending increased for the second month running, as consumers felt increasingly confident.
Jack Kennedy, senior economist at Markit, said: “Falling inflation delivered a boost to UK households in April, resulting in the best sentiment towards their financial situation since the start of the survey over five years ago.
“A long-awaited return to rising real wages is likely to boost consumer spending as we move through 2014, adding another piece to the jigsaw of the UK’s economic recovery.”
Today’s figures come the day after the ONS reported average UK house price had hit a new record high.
The typical cost of a home had soared by 9.1 per cent during the year to the end of February, to stand at £253,000 – a £20,000 gain during the past year.
The London property market continued to power ahead, with prices in the capital surging by 17.7 per cent during the year to stand at £458,000.
With rising interest rates looming are you considering this option that could save thousands of pounds?
With house prices rising and an interest rate increase looming on the horizon, is this a good time to consider remortgaging?
The Bank of England’s Monetary Policy Committee has indicated that it may begin raising interest rates from their record low of 0.5 per cent early next year as Britain’s economic recovery continues to power ahead.
Bank Governor Mark Carney recently said the official cost of borrowing could reach 3 per cent by 2017 – adding £208 a month to a £100,000 mortgage.
Unsurprisingly, the cost of fixed rate mortgages has already begun to creep up in anticipation of a future hike in the Bank Rate.
The average rate for a two-year fixed rate deal is now 3.65 per cent, up from 3.52 per cent in January, which was the lowest rate since Moneyfacts began tracking the data in 2008.
More significantly, two-year swap rates – upon which fixed rate mortgages are based – have nearly doubled during the past year, rising from 0.63 per cent in April 2013 to 1.08 per cent now.
A similar pattern has emerged for five-year fixed rate deals, with average rates rising from 3.92 per cent at the start of the year to 4.04 per cent now, while swaps have risen from 0.99 per cent to 2.06 in the past year.
Adrian Anderson, director of Anderson Harris, said: “Now is still a good time to consider re-mortgaging as long term fixes are still incredibly cheap, but fixed rates have started to increase over the past few weeks and I think will continue to do so.”
Moneyfacts has Clydesdale Bank’s two-year fixed rate deal as its current best buy.
The bank is charging interest of 3.89 per cent for people borrowing up to 90 per cent of their home’s value, with no fee, free legals for remortgage customers and a £500 rebate.
For those with more equity in their home, Norwich & Peterborough Building Society has a two-year deal of 2.04 per cent with a £345 fee for those borrowing up to 65 per cent of their property’s value.
The Post Office is offering a rate of 3.25 per cent fixed for five years, with no fee, to those with a 25 per cent equity stake.
Richard Sexton, director of e.surv chartered surveyors, said: “I think it is a good time to remortgage.
“The likelihood is that rates will start going up over the next 12 months, so if you can lock into a deal that works for you for the next two to three years, you will be likely to be better off.”
His comments follow a significant rise in house prices during the past year, with the average cost of a home in England now standing at £259,745, according to Zoopla.
Mr Sexton added: “People who previously perhaps could not remortgage because the loan to value was too high for the lenders probably can now.
“Other people may be able to remortgage at a lower loan to value, and if they were previously at a threshold, they could find that they can benefit from a better rate.”
But while it is clearly a good time to remortgage, the decision may be less clear cut for people who are on some of the very low tracker rates taken out before the credit crisis struck.
Mr Sexton said: “People have to weigh up whether they want to benefit from these rates for as long as possible, versus having a degree of certainty about mortgage repayments.
“If it is important to have certainty, even if it means moving to a slightly higher rate, it allows you to plan.”
He added that people weighing up whether to take out a lower rate tracker product now or a higher rate fixed rate deal had to make a similar decision.
He said: “The concern I would have is that we have got so used to low interest rates, people may get caught out by rate rises. There are people now with mortgages who have never experienced a rate rise.”
Mortgage lending to first-time buyers soared by more than 50 per cent during February as people continued to return to the property market, figures showed today.
A total of £3.1bn was advanced to consumers buying their first home during the month, in line with January’s figure, but a massive 55 per cent higher than in February 2013, the Council of Mortgage Lenders said.
There was also a 38 per cent year-on-year increase in lending to homemovers as demand for property remained strong.
Overall, a total of £7.8bn was advanced to both homebuyers and those remortgaging.
This was slightly below the £7.9bn lent in January, but 47 per cent ahead of the total for February 2013, as the recovery in the mortgage market continued.
Paul Smee, director general of the CML, said: “We would expect a seasonal lending dip around this time of year.
“However, lending to both first time buyers and home movers bucks this trend, continuing to show momentum.
“The substantial year-on-year growth shows how far the market has moved since the flat period experienced up until around a year ago.”
The typical first time buyer borrowed 3.4 times their gross income during February.
But low mortgage interest rates meant they spent just 19.2 per cent of their income on mortgage repayments, only slightly up on the recent low of 19.1 per cent seen in November 2013.
The typical amount borrowed by those buying their first home fell slightly to £119,000, compared with £119,735 in Janaury, while average incomes were also marginally lower at £35,297, down from £36,408.
But despite strong lending to those buying a property, remortagging activity was more subdued.
A total of 23,800 loans were advanced to those remortgaging, less than half the 48,400 that went to those buying a home.
Remortage loans totaled £3.5bn in February, 17 per cent lower than January’s figure but still 30 per cent up on the same month of 2013.
Buy-to-let lending was also lower than in January, although lending by both volume and value was up on February 2013.
Mr Smee warned that lending may fall when the Mortgage Market Review comes into force at the end of this month, given the magnitude of the changes the industry faced.
But he added: “Overall, we expect to see continuing growth in mortgage borrowing ahead, within responsible lending parameters, as the pent-up demand of the recession years finds an outlet in a stronger market.”
The figures come as the Royal Institution of Chartered Surveyors said property sales jumped to a six-year high during the first quarter of the year as buyers continued to return to the market.
But the group warned that the supply of new homes being put up for sale remained low after the predicted ‘spring bounce’ had failed to materialise, with new instructions falling for the third month in a row.
It said the ongoing mis-match between supply and demand would put further upward pressure on prices, with surveyors expecting annual house price inflation to average 6 per cent per annum during the next five years.
But despite rising house prices there are few fears that the property market will be stoked by irresponsible lending practices.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Any fears that borrowers will be tempted to overstretch themselves can be allayed by the introduction of the Mortgage Market Review.
“Processing times for mortgage applications are likely to increase as a more forensic approach to expenditure is adopted but it should result in a more sustainable mortgage market.”
Today is Mortgage Freedom Day – the day on which new homeowners have earned enough money to cover the cost of their mortgage for the whole year.
It takes the average person who has recently bought a new property 100 days to earn enough to meet their annual mortgage repayments, according to Halifax.
But renters will have to work for another 32 days before they have brought in enough cash to cover their annual accommodation costs, with Rent Freedom Day not coming until May 12.
The average annual mortgage repayment currently stands at £6,954, while the average salary is £25,603 a year after tax, according to the group.
It said Mortgage Freedom Day occurred three days earlier this year than in 2013, while it is almost a month earlier than it was five years ago.
The date has been brought forward as a result of the average net annual income increasing by £2,153 during the past 12 months.
At the same time, the average mortgage payment has risen by only £357 a year during the same period.
Craig McKinlay, mortgage director at Halifax, said: “While monthly mortgage and rental costs account for the majority of many people’s household budgets, Mortgage Freedom Day provides a different perspective on how much we spend on these costs over the course of a year.
“Our research shows that today, if people had put everything they’d earned since the start of the year towards their mortgage, the average homeowner would be mortgage free for the remainder of the year, which is a reassuring thought.”
Unsurprisingly, there is considerable regional variation in when Mortgage Freedom Day occurs.
Homeowners in four London boroughs have to wait until well into July before they have earned enough to cover their annual mortgage costs.
At the other end of the scale, people in Armagh in Northern Ireland have the earliest Mortgage Freedom Day, with it falling on February 13.
On a regional basis Mortgage Freedom Day occurs earliest in Northern Ireland, falling on March 10, followed by Scotland where it is on March 11.
Unsurprisingly, London has the latest Mortgage Freedom Day, with homeowners in the capital having to wait until May 20 to have earned enough to meet their annual mortgage costs, closely followed by the South East on May 2.
The mortgage market is recovering to its pre-credit crisis state as both lending levels and product choice rebound.
Total mortgage lending soared by 43 per cent year-on-year during February to stand at its highest level for the month since 2008, the Council of Mortgage Lenders recently said.
But it is not just the volume of lending that is showing signs of improving, with the range of products available also increasing significantly during the past 12 months.
The number of different mortgages available to people with just a 5 per cent deposit has more than doubled since April 2013, according to data from Moneyfacts.co.uk.
There are now 179 different home loans available to people borrowing 95 per cent of their home’s value, up from just 73 a year earlier.
The current number is also above the 134 mortgages that were on the market for people with a 5 per cent deposit in early 2008, shortly before the credit crisis began to exert its strangle hold on the market.
There has also been a big increase in the number of deals for borrowers with a 10 per cent deposit and a 15 per cent one, with availability for both categories rising by 20 per cent in the past year.
Overall, there are now more different mortgages available than in 2008 in all but two loan to value categories.
Rachel Springall, finance expert at Moneyfacts.co.uk, said: “The 5 per cent deposit market is booming with a variety of choice for borrowers, this is largely due to government initiatives which have been the driving force, such as the Help to Buy scheme.”
As well as the government schemes, there are growing signs that lenders are becoming more willing to advance mortgages to people with only small deposits.
In its recent Trends in Lending report, the Bank of England found mortgage availability had increased for the seventh consecutive quarter during the first three months of 2014, particularly for people looking to borrow a high proportion of their property’s value.
The Bank said there was a significant increase in the willingness of lenders to advance money to people with a deposit of 10 per cent or less.
It added that although this improvement was in part driven by the Government’s Help to Buy scheme, it expected this trend to continue going forward, as lenders looked to increase their market share.
Adrian Anderson, director of mortgage broker Anderson Harris, said: “I think that confidence in the economy and housing market has made it easier for banks to produce higher LTV mortgages. “
But he added: “Banks are very selective and will be assessing high LTV mortgages with a fine tooth comb and will require a squeaky clean credit history hence only the strong applicants will qualify for a high LTV mortgage.”
But there is still one area of the mortgage market that has not recovered, and that is the level of choice for people looking to take out 100 per cent mortgages.
There are currently just six deals available for people with no deposit, up slightly from four in April 2013, but still well down on the 14 that were on the market in 2008.
Lenders are also continuing to favour those borrowing a low proportion of the property’s value, with 466 mortgages available to people with a 40 per cent deposit, compared with just 25 before the credit crisis started to impact the market.
But despite the improvement in the number of mortgages available for people with only small deposits, the introduction of the Mortgage Market Review on April 26 means lenders are unlikely to ever return to the looser lending criteria seen in the past.
The new regime will require banks and building societies to carry out a detailed assessment of borrowers’ ability to keep up with their loan, while interest-only mortgages will only be advanced to people who have a credible repayment plan.