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?
The Mortgage Works, the specialist lending division of the Nationwide Building Society, has today opened up a new chapter in the buy to let mortgage market. For months now many landlords have been struggling to remortgage their properties but it seems that The Mortgage Works is happy to take on new business offering 80% mortgages from today - which is an improvement on the previous 75% cap.
Over the last few days it has become apparent that transaction numbers in the UK mortgage debt market have increased significantly. Indeed a number of investors who have acquired large mortgage debt portfolios, often for well below their face value, have now stepped forward with discount offers if customers remortgage their homes with new lenders. So how does this work?
While February saw a £1.8 billion increase in mortgage lending across the UK this figure dropped to an increase of just £300 million in March amid concerns that the UK property market is slowing down. Even though the fact that UK mortgage lending is still growing is a positive sign there is concern at the steep rate of fall in the growth factor. There may be a number of reasons for the steep fall in growth but it does not help sentiment in the UK housing market.
As we stare head-on towards a hung parliament in the UK come Friday morning there are serious concerns about the potential impact on the UK housing market. When you consider that over 50% of the UK employment market is in some way connected to state operations and the public-sector, there is the potential for significant job cuts in the short to medium term which would impact upon general economic activity and demand for houses.