UK mortgage lending increased by £0.5 billion in April which is an improvement on the £0.2 billion increase in March but well below the £1.6 billion average over the last six months. The number of mortgages approved increased to just under 50,000 against just over 49,000 in March, although again this is well below the 53,600 six monthly average. The number of people looking to remortgage their homes has stayed fairly stable with just over 26,000 remortgages agreed in April.
Lloyds bank has today become the second UK mortgage company to increase its standard variable mortgage rate for new customers. This rate will run in tandem with the current guaranteed standard variable rate which the bank promised would never rise more than 2% above the Bank of England base rate. However, the new rate will be introduced from 1 June and will be priced at 3.99% which is obviously well above the 2.5% current standard variable rate customers are being charged.
As problems in the European money markets continue to grow there is concern that at some point this will impact upon the UK mortgage market and the already fragile funding situation. We have already seen money market rates rise over the last few days and they are more than likely to increase further in the days to come. So what will happen if the UK mortgage market is impacted yet again?
It was revealed that gross mortgage lending between March and April fell by a significant 12% amid signs that the funding gap in the UK mortgage market is worsening. Since the credit crunch we have seen a massive increase in the cost of credit in the wholesale money markets although a variety of former government schemes have taken some of the pressure away from funding issues. However, a number of these schemes have now ended and concern is growing as to how the current funding deficit will be breached.
Over the last few days it has become more and more apparent that competition in the UK mortgage market is increasing. However, on the flipside of the coin it is also becoming more and more apparent that mortgage companies are looking to reduce their risk. We have seen the likes of Lloyds Bank amending various conditions attached to interest only mortgages with many experts believing that these potentially risky mortgage arrangements could be phased out in the UK.
Lloyds bank recently announced plans to cap interest only mortgages at £500,000 amid signs that a number of mortgage institutions in the UK are looking to phase out interest only mortgages. When you also consider that Nationwide is reviewing its interest only mortgage range and Santander recently cut the loan to value percentage from 85% to 75% it would seem that the days may well be numbered for interest only mortgages in the UK. So why are interest only mortgages on the way out?
Housing repossessions fell in the first quarter of 2010 to 9,800 compared to 10,600 in the previous quarter and 13,200 during the same period in 2009. The number of homeowners in arrears also fell from 196,400 in the previous course quarter to 186,300 in the first quarter of 2010. So what does this mean for the UK property market?
The housing charity Shelter has today warned that up to 5 million homeowners in the UK can ill afford the additional mortgage cost if UK base rates were to rise. This is a terrifying situation for the UK housing market and is one which the UK government is certain to take notice of. Even though the Bank of England has already suggested that base rates will remain at 0.5% for some time to come, there is concern that inflation could return with a vengeance in the short to medium term.
Lloyds bank has this morning tightened its regulations on interest only mortgages suggesting that the sale of your main residence is no longer proof of an ability to repay your mortgage. The bank is now looking for additional investment vehicles such as endowments, pensions, Isas and share portfolios as backup in the event there is a shortfall on the sale of your main residence.
It is been revealed that from tomorrow the Post Office will offer 90% mortgages for first-time buyers with rates of between 5.45% and 5.99%. It is believed that tracker and mortgage deals of up to 90% will also be available in a move which is certain to be replicated across the board. So is this the start of more competition in the UK mortgage market?
