UK housing market is on solid ground, although price rises to slow in 2016

ReutersBritish house prices will rise more slowly next year than in 2015, according to a Reuters poll of analysts that also found interest rates would have to reach 3 percent before seriously affecting the market.

The bedrock of consumer wealth in Britain, house prices will rise 5 percent this year and 4 percent in the next two years, according to a poll of 22 property market experts taken in the past week, similar to forecasts published three months ago.

Wages will pick up faster than inflation – pegged at 0.2 percent this year, 1.6 percent in 2016 and 2 percent in 2017 – but will not match house prices rises until 2017, another Reuters poll found.

“An acute shortage of homes for sale, coupled with a recovery in housing demand as the labour market continues to strengthen, is putting upwards pressure on house prices,” Capital Economics’ Matthew Pointon said.

“However, with interest rates set to rise gradually from next year, and house prices already at very high levels, gains in 2016 and 2017 will be far more modest.”

Interest rates have sat at a record low of 0.5 percent since early 2009 and a Reuters poll this month suggested they will not rise until early next year and that even then, increases will be gradual.

Sixteen of 19 participants in the poll said the housing market was strong enough to withstand higher interest rates and the median said the lending rate would need to reach 3 percent before having a serious effect, something the rates poll predicted would not happen until 2018 at least.

“Small, gradual and anticipated interest rate rises, alongside decent GDP growth, are unlikely in themselves to derail the housing market,” the Council of Mortgage Lenders’ Bob Pannell said.

In a further sign Britain’s housing market is on solid ground, mortgage approvals rose in July to their highest level in 17 months.

The average asking price for a home in greater London was £606,826 ($951,078) in August, property website Rightmove said last week, more than double the national level of £292,284.

With the national average annual salary at £27,200 last year, house prices in London – which have surged in recent years – were therefore deemed unaffordable or very unaffordable by all but one respondent in the poll.

If prices rise 5.3 percent this year, 3.5 percent in 2016 and 4.5 percent in 2017 as expected, homes in the capital will be even further out of reach of most people.

Medians from the poll said the average level of London house prices on a scale of one to ten – from very cheap to very expensive – was nine. On a national scale they were rated seven.

“London is now significantly above its previous peak and a large part of a generation is priced out of the market. Across the country, this is markedly less true,” independent consultancy Building Value’s Tony Williams said.

Source: Reuters

UK mortgage activity improved in second quarter of 2015, CML data shows

CMLlogosmallThe London property market saw increased mortgage lending in the second quarter of 2015 but levels were still down compared to the same quarter last year.

The latest quarterly data from the Council of Mortgage Lenders shows that home owner house purchase activity in Greater London came out of the traditional seasonal dip to show growth in the second quarter by volume and value.

First time buyer activity saw similar trends with an increase in levels on the first quarter of the year, but this sector was also down on the same quarter last year.

Unlike house purchase activity, remortgage lending had quarter on quarter and year on year growth in both volume and value.

“As in the UK overall, the London market came out of the usual seasonal dip in the first few months of the year and saw increased activity but volumes are still  on the same period last year,” said Paul Smee, director general of the CML.

“Remortgage activity has shown quarterly and year on year growth after a period of stagnation. Borrowers appear to be taking advantage of competitive mortgage rates, ahead of a potential future interest rate rise,” he added.

In Wales house purchase activity saw large quarter on quarter increases compared to the first quarter of the year, but a slight decline in volume of loans compared to the second quarter in 2014.

First time buyers increased significantly from the first quarter, but decreased in amount borrowed and number of loans compared to the second quarter of 2014.

Home movers went up in volume and value quarter on quarter, and while number of loans remained unchanged year on year the amount borrowed by home movers increased.

The data also shows that remortgage activity increased compared to the first quarter and on the same quarter last year.

“House purchase activity appears to have woken up in Wales after traditionally slower levels in the winter months,” said Julie-Ann Haines, CML chair for Wales.

“The uptick in remortgage is, in particular, striking as levels had remained relatively identical over the previous four quarters. With the current low rates of interest unlikely to continue, it seems that borrowers are now taking advantage of competitive mortgage rates before a rise,” she added.

Source: Property Wire

Mortgage market waking up as summer bounce beckons

Lending for house buying is still down compared to this time last year but there are signs that the market is at last awakening in time for a modest summer bounce, according to the Council of Mortgage Lenders.

It says home owners took out 49,000 loans in May, the highest number since December. That compares with 48,300 loans taken out in April.

“House purchase lending in May was slightly up on the previous month, suggesting the market might be waking up after a subdued first quarter. Activity has broadly been down on last year but we expect it to rise in the summer months as, with historically low interest rates and a competitive lending environment, borrowing conditions are relatively favourable” says Paul Smee, director general of the CML.

“But we cannot ignore the continuing affordability constraints caused by high house prices relative to earnings which will work in a contrary direction” he adds.

First-time buyers saw a decline in lending volumes compared to last year, but up slightly on the previous month. Home mover lending saw a similar trend with volumes up slightly on April but down year-on-year.

Home-owner remortgage activity declined compared to the previous month and compared to the same period last year.

Buy-to-let continues to grow year-on-year, mainly driven by remortgage activity, but also saw a slight month-on-month increase due to higher buy-to-let house purchase lending activity.

Source: Estate Agent Today

Buy to let boom continues with new mortgage highs

The buy to let sector is at its strongest for six years according to data released by the Bank of England. 

Lending for buy to let mortgages jumped to a whopping £8 billion in the third quarter of this year – the highest quarterly lending volume since 2008 and up from £5.9 billion in the same period of 2013.

These are just the latest figures to show the private rental sector going through a boom.

According to the Council of Mortgage Lenders lending in September – its most recent data – is 24 per cent higher by volume than in the same month last year, and 32 per cent by value. Paragon, one of the country’s chief buy to let lenders, says it has this year seen an 82 per cent rise in completions by investment purchasers.

Source: Letting Agent Today

Number of first time buyers up by 42 per cent

Boards smlLending to first-time buyers, home movers and remortgagors all increased in May, with a particularly marked increase in lending to first-time buyers, according to the latest Regulated Mortgage Survey data published today by the Council of Mortgage Lenders.

The £8.4 billion of lending for house purchase accounted for 57% of all mortgage lending in May (by value), while remortgaging at £4 billion accounted for 27%, and other lending (including lifetime, buy-to-let and further advances) at £2.3 billion accounted for 16%.

The number of mortgages to first-time buyers in May reached 25,100 – 29% higher than in April, and 42% higher than in May last year. First-time buyers accounted for 45% of all loans for house purchase, similar to the levels of the past few months but considerably higher than the 38% seen on average since 2007.

The number of first-time buyer loans was the highest monthly figure since late 2007, and a marked contrast to the low point of just 8,500 loans in January 2009. By value, first-time buyer lending reached £3.4 billion in May, up from £2.5 billion in April and £2.2 billion in May last year.

For some months, there has been an increase in the number of first-time buyers entering the market with smaller deposits – this has now resulted in a shift in the average first-time buyer loan-to-value ratio rising to 83%, up from 81% in April and the highest ratio since November 2008. First-time buyers are also typically borrowing more (£113,400 in May, on average, compared with £110,000 in April and £105,000 in May last year), and typically now have higher incomes (£35,700 in May, up from £33,500 in May last year). The age of the typical first-time buyer remained at 29.

The number of loans to home movers in May was up by 32% on April, an increase similar to that among first-time buyers, but unlike the first-time buyer market  the number of home-mover loans rose by a more modest 4% compared with May last year. And, in contrast to the shift in first-time buyer loan profile, movers have experienced far less change in average loan size, income, or loan-to-value.

Paul Smee, director general of the Council of Mortgage Lenders, commented:

“Although monthly lending is still running at far less than half its typical monthly level during the peak, there is no doubt that the mortgage market is firmly open for business. Both the borrowing appetite of first-time buyers, and the availability of attractive mortgages for them, have improved markedly since a year ago.

“What is interesting is that, in contrast to some recent assertions, this is happening in parallel with the strengthening buy-to-let market. It is perfectly possible for both the buy-to-let market and the first-time buyer market to improve at the same time, as the evidence clearly demonstrates.

“It is important that the supply of housing steps up, as increased housing supply is a crucial factor in ensuring that housing is affordable over the long term.”

Click here for full CML report.

Gross mortgage lending increases by 21% in May

CMLlogosmallThe Council of Mortgage Lenders estimates that total gross mortgage lending in May increased to £14.7 billion, representing a rise of 21% from £12.2 billion in April and 17% higher than the total of £12.6 billion in May 2012.

This is the highest monthly estimate for gross mortgage lending since October 2008.

Commenting on market conditions in this month’s Market Commentary, CML chief economist Bob Pannell observes: “The imminent change of guard at the Bank of England takes place against the backdrop of a modestly improving UK economy, albeit one that appears to rest upon a pick-up in consumer spending and a recovering housing market.

“Funding conditions, helped by the funding for lending scheme, continue to look favourable and are supporting more competitive mortgage pricing and availability and a gradual resumption of lenders’ risk appetite.

“While the direction of travel is clear and fits well with the more positive housing surveys from RICS and others, our forward estimate does imply somewhat stronger house purchase activity than we had been expecting. This may reflect a degree of pent up sales following the extended spell of poor weather earlier this year”.

Source: Council of Mortgage Lenders

Londoners still aspire to home ownership

CMLlogosmallHalf of all adults surveyed in London would like to buy a new home to live in (be that a first or subsequent home) in the next 2-3 years, according to findings by the Council of Mortgage Lenders based on a survey undertaken by YouGov.

In the longer term, 75% of adults currently living in London would like to own their own home in 10 years time, a slightly lower proportion than in Great Britain overall where 79% of individuals indicated a longer term preference for home ownership.

In line with these consumer trends, first-time buyer activity was similar to the first quarter of 2012, while home mover lending and remortgaging was down, according to separate data released today by the CML.

A total of 9400 loans were advanced to first-time buyers in the first quarter in London, unchanged from the same quarter last year. This was a more positive result than the figures suggest due to the boost in first-time buyer activity in the first quarter last year as a result of the end of the stamp duty holiday in March.

First-time buyer affordability in London remained tighter than in the UK overall. First-time buyers borrowed an average of 3.58 times their income in the first quarter and their mortgage payments, on average, consumed 21% of their income. This was a marginal improvement compared to the fourth quarter of 2012 and is likely to due to the continuing downward trend in mortgage interest rates, however affordability remained less favourable than in the UK overall where the average income multiple was 3.23 in the first quarter and on average 19.5% of first-time buyer income was taken by mortgage payments.

The average loan-to-value ratio for first-time buyers remained at 75% in London in the first quarter, below the 80% seen in the UK overall.

First-time buyers in London continued to make up a larger proportion of house purchase loans in the first quarter than in the UK overall. 54% of house purchase loans advanced in the first quarter in London were to first-time buyers compared to 44% in the UK overall.

As in the UK, lending to home movers in London dipped in the first quarter. A total of 8000 loans (worth £2.3billion) were advanced to home movers in London, an 18% fall compared to the fourth quarter of last year, and down by 5% compared to the first quarter of 2012.

While lending to home movers fell in London, the falls were not as large as in the UK overall, where lending fell by 9% compared to the first quarter of 2012 and by 24% compared to the previous quarter.

Total house purchase lending fell in the first quarter in London compared to both the previous quarter and the first quarter last year. A total of 17,400 loans (worth £4.1billion) were advanced for house purchase in the first quarter in London, a 12% fall compared to the previous quarter – reflecting the expected seasonal pattern with weaker activity in the first two months of the year.

This also represented a 2% fall compared to the first quarter of 2012 – however when the stamp duty effect is factored in (which boosted activity in the first quarter of last year) this suggests a more positive outcome.

As in the UK overall, remortgage lending in London remained subdued. A total of £1.8 billion was advanced to borrowers remortgaging in the first three months of 2013, an 18% drop compared to the first quarter of last year, similar to the fall seen in the UK as a whole, where remortgage lending dropped by 19% compared to the first quarter of last year.

CML director general Paul Smee said: “These figures show that higher house prices and tougher affordability constraints in London have not had a significant impact on consumer appetite to buy or move home in the capital. A similar percentage of those who live in London want to be home-owners despite differences in demographics and population flows.

“Lending activity in London was largely similar to the same period last year, a positive picture bearing in mind the significant boost to the market caused by the end of the stamp duty holiday in March last year.”


Significant rise in first-time buyers

CMLlogosmallFirst-time buyer activity in the UK continued to grow in March with the number increasing by 20%, according to new figures published by the Council of Mortgage Lenders (CML).

There was also a marginal month-on-month rise in the volume of home movers and remortgage lending, helping to contribute to a welcome increase in overall property purchase lending.

The data reveals that overall a total of 19,100 loans worth £2.4bn were advanced to first-time buyers in March, up from 15,900 loans in February, but down on the 24,400 loans advanced in March 2012.

But the CML pointed out that March 2012 marked the end of the first-time buyer stamp duty holiday which fuelled a sharp rise in in activity.

Despite the spike in March last year, first time buyer lending activity over the first quarter of 2013 declined only slightly compared to activity in Q1 2012. Overall, 50,900 loans were advanced to first-time buyers in Q1 of this year, only slightly down on 51,200 loans in the first three months of last year.

The data also shows that while the loan to value ratio for first time buyers remained at 80%, there has been a gradual increase in the proportion of first time buyers taking out loans with a deposit of 10% or less.

CML director general Paul Smee said: “First time buyer activity in the first quarter was nearly at the same level as last year when figures were buoyed up by the end of the stamp duty holiday. This suggests that the market continues to be favourable for those looking to buy their first home.”

“More borrowers are taking out higher loan to value mortgages than any other time in the last four years, a sign that lenders are open for business, and that borrowers, even those without a large deposit, are increasingly able to get a foot on the property ladder.”

UK house prices set to soar – CEBR

Boards smlMillions of British homeowners were given a timely boost last night as it was forecast average house prices are set to rocket by £45,000 over the next five years, according to a report in Britain’s Daily Express newspaper.

The report says: As the UK economy stutters back into life the outlook looks bright for those owning or aspiring to own their own home with yearly increases of £9,000.

And in a double boost, mortgage rates have hit record lows as the high street feels the effects of action to breathe life into a previously stagnating housing market.

The positive picture comes in a top-level report by the respected Centre for Economics and Business Research. Experts said the average UK home would be worth £267,000 by 2018 – up from today’s £222,000.

“By 2018, we expect the typical UK home will cost £267,000 – over 20% more than this year.”

The boom equates to a £25-a-day – or £750-a-month – increase in value and proves action is working to drag the housing market out of the doldrums.

The news quickly follows Chancellor George Osborne’s budget “to get Britain moving again”, which contained a raft of measures to help people get a foot on the property ladder.

Last night economist and report author Daniel Solomon said: “By 2018, we expect the typical UK home will cost £267,000 – over 20% more than this year.

“Gradual wage and population increases will be the fundamental drivers of this medium-term trend. We expect the Chancellor’s new Help to Buy scheme will push up house prices before it raises housing supply.

“We predict the scheme’s effects will be quite modest, but it could support the construction of roughly 5,000 new homes in 2015. This supply boost could provide a welcome route on to the housing ladder for a small number of aspiring homeowners.”

News of a resurgence in Britain’s housing market comes after the Council of Mortgage Lenders reported home loans had got off to their best start since 2008, when the market was at its pre-crisis peak.

Buyers can now pick up some of the lowest rates in history, with one building society offering a two-year fixed rate at a staggering 1.74 per cent.

Lacklustre wage growth, recapitalisation by domestic banks and the deepening Eurozone crisis are expected to subdue house price growth this year.

But next year, the CEBR expects house prices to be 2.3 per cent higher than they were in 2007.

Experts said the predicted strengthening economy will lead to rising wages, while population growth is projected to outpace housing supply increases.

It is these two crucial factors that will lead to accelerating house price growth. By 2018, the CEBR forecasts a typical UK home will cost £267,000, as house prices rise by 4.6 per cent over that year.

Incredibly, in five year’s time UK house prices will be 20.4 per cent higher than they currently are.

Last night independent financial expert Stephen Bacic urged Britain’s army of first-time buyers to take the plunge and invest in bricks and mortar.

He said: “There is a lot of pent-up demand out there but credit is getting easier to obtain. I don’t believe there is ever a bad time to buy a house – people have absolutely nothing to gain by waiting to get on the property ladder. Now is as a good a time as ever.”

Click here to read to full Daily Express report.

Property sales hit five-year high – HMRC

UK house sales increased last year to the highest levels seen since 2007, according to figures published by HM Revenue & Customs.

According to a report in The Telegraph, lenders hailed the figures as evidence that the “shutters are coming up” for mortgage borrowers.

There were 932,000 completed transactions last year, marking a 5pc increase on 2011, according to HMRC.

Meanwhile, the Council of Mortgage Lenders (CML) outlined evidence of why it believes the mortgage market is improving.

In its latest “news and views” release, the CML said: “Overall, there has been a marked sense of improvement in the mortgage lending landscape over the past year, which we forecast will continue in 2013.”

It said that at around 220,000 last year, the number of first-time buyers reached its highest level since the credit crunch started.

It also estimates that the share of first-time buyers getting on the property ladder without needing any extra help from parents has increased in the last couple of years.

The CML said: “We estimate that there has been a slow and steady increase in the proportion of first-time buyers buying without assistance from 32pc of all first-time buyers in 2009 to 36pc in 2012.”

The CML said yesterday that it expects mortgage lending to reach £156 billion this year, compared with an estimated £143 billion during 2012.

The HMRC figures showed that the number of sales in 2012 was still almost half the levels seen five years earlier.

However, sales picked up in the final quarter of last year to 237,000 transactions, showing a 4pc increase on the previous quarter and a 2pc increase on the same period in 2011.

The CML said: “It may be easy to overlook the recovery that has already quietly been under way in the mortgage market throughout 2012.

“Indeed, we suspect that consumer sentiment may not yet have caught up with the extent to which the mortgage market has already improved; and some commentators still take as their benchmark the over-heated market of the mid-2000’s.”

See full report here