U.K. Mortgage Approvals Rise to Highest in 5 1/2 Years

This article by Scott Hamilton of Bloomberg on October 29th, 2013 tells us that on September mortgage approvals in UK rose to the highest level.

U.K. mortgage approvals rose to the highest in 5 1/2 years in September, adding to signs of a strengthening property market that’s being stoked by government incentives.

Lenders granted 66,735 mortgages, the most since February 2008, compared with a revised 63,396 the previous month, the Bank of England said in a report in London today.

Home-loan rates fell to a record low, and gross mortgage lending was 15.6 billion pounds ($25 billion), the highest since October 2008. 

Hometrack Ltd. said yesterday that house prices in England and Wales rose 3.1 percent in October from a year earlier, the biggest gain since 2007. Chancellor of the Exchequer George Osborne’s acceleration of his Help to Buy program this month is boosting real-estate activity and Hometrack said the gap between supply and demand is widening.

“The housing market is surging as low interest rates and rising confidence feed buyer interest,” said Rob Wood, an economist at Berenberg Bank in London. “It is early days, as real house prices and transactions are still below their pre-crisis levels. But the key issue is not where prices are today, rather it is where they will be in a couple of years. Prices and activity are rising fast.”

The September mortgage approvals figure exceeded economists’ forecasts. They predicted an increase to 66,000, based on the median of 23 estimates in a Bloomberg News survey. Net mortgage lending rose 1.03 billion pounds last month and consumer credit increased 411 million pounds, the BOE said.

Mortgage Rates

The BOE also reported that mortgage interest rates fell to a record low in September. The effective interest rate on all outstanding home loans fell 2 basis points to 3.3 percent. On new loans, the rate dropped 7 basis points to 3.08 percent.

Former Financial Services Authority Chairman Adair Turner has added his voice the critics of Osborne’s housing program, saying in an interview published yesterday that Britain risks repeating the debt-fueled binge that led to the credit crisis.

Despite government pledges to rebalance the economy away from consumer spending and the housing market, “we now seem to be having a recovery which is heavily focused on that favorite old British activity, which is another house price boom,” Turner said. “That’s not a sustainable, balanced economy.”

While mortgage lending is rising, approvals remain below their average of about 104,000 in the decade through 2007. BOE policy makers have cited that figure as they downplayed the risks from the housing market. Jon Cunliffe, who will join the BOE as deputy governor for financial stability next month, said on Oct. 15 that housing market is not overheating.

Corporate Lending 

Separately, the BOE said business lending rose 720 million pounds in September from August. While that compares with an average decline of 1.5 billion pounds over the previous six months, lending was still down 3.2 percent from the same month a year earlier, according to the data.

For small and medium-sized companies, lending fell 383 million pounds on the month and was down 3.2 percent versus a year earlier.

The pound remained lower against the dollar after the data and was trading at $1.6091 as of 10:28 a.m. London time, down 0.3 percent on the day. The yield on the benchmark 10-year U.K. government bond fell 1 basis point to 2.59 percent.

The BOE also said foreign investors bought a net 2.48 billion pounds of gilts in September. That followed a net sale of 6 billion pounds in August. It said M4, a broad measure of money supply, rose 0.6 percent in September from August and 2.6 percent from a year earlier.

To contact the reporter on this story: Scott Hamilton in London at
shamilton8@bloomberg.net
 
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

Article Source: http://www.bloomberg.com/news/2013-10-29/u-k-mortgage-approvals-rise-to-highest-level-in-5-1-2-years.html 

U.K. Mortgage Approvals Rise to Highest Since 2008

This article by Eshe Nelson by Bloomberg on September 30th, 2013 reveals the highest increase of mortgage approvals in the UK as the Help to Buy scheme prepares to accelerate.

U.K. mortgage approvals rose to the highest in more than five years in August as the government prepares to accelerate a home-buying program that’s been criticized for potentially over-stimulating the market.

Lenders granted 62,226 mortgages, the most since February 2008, compared with a revised 60,914 the previous month, the Bank of England said in a monthly report in London today.

The improvement in home-loan growth contrasts with business lending, which fell the most in eight months in August.

Hometrack said today house prices rose the most in more than six years this month and Prime Minister David Cameron yesterday brought forward by three months the second phase of his “Help to Buy” mortgage plan, saying it will start within days. The program has drawn criticism it may help fuel a property bubble, prompting the government last week to give the Bank of England the power to perform annual checks on it.

There is a “continued divergence across the household and the corporate sectors,” said Jens Larsen, chief European economist at RBC Capital Markets in London. “This picture will remain a worrying one for the Bank of England. While most commentators are focused on the risk of an overextended household sector, the bank is likely to concentrate its effort on improving credit to the corporate sector.”

The number of mortgage approvals exceeded the 61,500 figure that was the median estimate of 20 economists in a Bloomberg News survey. Net mortgage lending rose 974 million pounds ($1.57 billion) in August, the central bank said. Consumer credit increased 577 million pounds.

Company Lending

Business lending fell 3.8 billion pounds in August from July, the most since December and more than three times the average decline over the past six months. Lending is down 3.6 percent compared with a year earlier. For small- and medium-sized companies, lending has fallen 3.2 percent over the past year, according to the BOE.

“These figures are extremely disappointing, and show that Britain’s business finance system remains broken,” said Adam Marshall, director of policy at the British Chambers of Commerce. “While bigger and older companies can get finance when they need it, many young, dynamic, and fast-growing businesses are still frozen out.”

The pound rose 0.1 percent against the dollar today and was trading at $1.6161 as of 11:32 a.m. London time. The benchmark 10-year government bond yield was down 2 basis points at 2.69 percent.

Help to Buy

The BOE also said foreign investors sold a net 6 billion pounds of gilts in August, the most since June 2012. That followed a net purchase of 1.3 billion pounds in July. It said M4, a broad measure of money supply, rose 0.7 percent in August from July and increased 2.1 percent from a year earlier.

According to the Hometrack report, house prices in England and Wales rose 0.5 percent in September after a 0.4 percent gain in August. Annual price inflation accelerated to 2.4 percent. Prices rose in nine of 10 regions tracked by Hometrack. London led gains, with a 0.8 percent increase.

The first phase of Help to Buy -- interest-free loans for buyers of newly built homes -- began in April and has already contributed to the strongest housing market since the financial crisis. The second will provide government-guaranteed mortgages for buyers with a deposit of as little as 5 percent of the value of a home costing as much as 600,000 pounds.

With the plan facing criticism, Chancellor of the Exchequer George Osborne has downplayed risks of a property bubble, saying the housing market outside London remains weak. While the BOE has said property activity remains below its historic average, it will be “vigilant” to any risks.

“There is a mounting danger that house prices could really take off,” said Howard Archer, an economist at IHS Global Insight in London. “It is therefore of vital importance that policy makers closely monitor the situation and are prepared to act quickly and decisively if signs of the housing market overheating become increasingly widespread and pronounced.”

 Article Source: http://www.bloomberg.com/news/2013-09-30/u-k-mortgage-approvals-rise-to-highest-since-2008.html

Lenders in the UK Confident That Stress Tests Will Not Bar Most Mortgage Applicants

According to the research by the Intermediary Mortgage Lenders Association intermediary mortgage lenders in the UK are ensured that new affordability checks resulting from the MMR will not significantly reduce the number of people who successfully apply for a mortgage as shown in this recent article by the Property Wire on September 3rd, 2013.

Research by the Intermediary Mortgage Lenders Association found just 7% of intermediary lenders expect significantly more people will be turned down for a mortgage because of new stress tests, which will examine whether borrowers could afford their repayments in the event of interest rates rising.

IMLA’s Intermediary Lending Outlook shows that almost three quarters of lenders are confident that affordability checks will not impact borrowers in large numbers while the remaining 20% are unsure.

Overall responsibility for affordability checks will officially pass from brokers to lenders when the MMR takes effect in April 2014.  While many of its provisions are already standard practice for lenders, mortgage brokers are less convinced that aspiring borrowers will be unaffected.

Although 34% of brokers do not expect stress tests will significantly reduce the number of successful mortgage applicants, some 44% predict that considerably more consumers will find they are turned down.

However, brokers are significantly more confident about the impact of the MMR than they were at the start of the year. Some 66% are not at all worried in August 2013, compared with 42% in January 2013, and the percentage with significant worries has dropped from 12% to 4%.

In contrast, 67% of lenders are currently worried about the impact of MMR but despite their extra responsibilities under the new rules, no lender has serious concerns.

‘The MMR rules on affordability are built on common sense and are not too far removed from how many lenders already approach the issue. Recent experience has shown how important it is to ensure that mortgage borrowers can reasonably manage their commitments, not just now but in the future,’ said Peter Williams, executive director of the IMLA.

‘We are in unfamiliar territory when it comes to current interest rates, so we have to be pragmatic and anticipate the likelihood of change. Falling numbers of arrears and repossessions in recent years show a responsible approach to mortgage approvals, and lenders are working hard to ensure their existing tests meet the full MMR requirements without unfairly disadvantaging consumers,’ he explained.

‘Although the regulatory buck will rest with lenders from April 2014 there is still a collective responsibility to put affordability at the heart of the industry. This involves brokers working closely with lenders to help finalise the rules of engagement, while also ensuring that customer expectations are managed and applications suitably vetted,’ he added. 

Article Source: http://www.propertywire.com/news/europe/lenders-uk-mortgage-review-201309038187.html