Top Mortgage News

nigel woollsey

Nigel Woollsey

Online Writer
Published: 18/06/2019

For many younger people they are the lender of first choice for a range of needs, but new research by Legal & General and Cebr has highlighted just how much we depend on the bank of mum and dad – particularly when it comes to getting on the property ladder. New figures have revealed that bank of mum and dad is on course to contribute an average of £24,100 to help their children into their first house – some £6,000 more than the 2018 figure of £18,000.

The jump in loan sizes has increased total lending for the bank of mum and dad by 10% this year – up to £6.3bn from £5.7bn in 2018 – making bank of mum and dad the 11th largest mortgage lender in the UK.

Money from parents will continue to support thousands of buyers across the country in 2019 – being involved in more than a quarter of a million property purchases. This amounts to nearly one in five transactions in the UK mortgage market. In total, the bank of mum and dad will help buyers to purchase property worth nearly £70bn this year. In some parts of the UK, there has been an even bigger rise in contributions from family or friends. In the North West, the average bank of mum and dad ‘loan’ has nearly doubled from £12,900 to more than £24,000, while the South West saw the average contribution rise by over £10,000 to £29,700.

This shift in loan size could be because parent lenders are supporting family and friends to purchase larger properties. Three-bedroom houses or flats were the most commonly purchased properties in 2019 (44%), and well over a third (38%) have helped family or friends to buy a two-bedroom property. In fact, 15% of lenders were even helping loved ones to purchase properties with four or more bedrooms.

This year’s findings also suggest that the bank of mum and dad is playing a more complex role in the housing market than previously thought. Millennials (those aged 35 and under) continue to rely on mum and dad the most, with 62% needing financial support from their parents or other family members and friends. However, loans from mum and dad are helping more than just young first-time buyers. Findings show that more than a fifth of people aged 45-54 have received financial assistance from elderly parents to purchase their latest property, while around 7% of over-55s have also received help from family or friends to buy their most recent home. This support for older buyers is expected to double, with 14% of Britain’s over-55s expecting assistance from their parents for a future house purchase.

Of course, not everyone has parents who are able to assist with a house purchase for one reason or another. For those people, the Government’s various Help to Buy schemes have been established across the UK. The help on offer takes the form of an equity loan guaranteed to be interest-free for the first five years. However, buyers in these schemes are restricted to the purchase of new build houses. Indeed, some recent news stories have suggested that many people who used the Help to Buy schemes could have bought a house without the assistance of this scheme – drawing the question of who these schemes are helping in reality.

Find out more with our Help to Buy equity loan guide and see our comparison chart for the best first-time buyer mortgages.

 

This week the best rate in both the moving home and remortgage charts was 1.26% discounted variable for two years. For first-time buyers the best rate on offer was also a variable rate of 2.54% discounted variable for two-years. While variable rates were the most competitive rates across all the charts, there were still good deals that could be found within the fixed rate charts across all mortgage types.

A report on the Government-backed Help to Buy Equity Loan scheme has been published by the National Audit Office.

In the report it was revealed that two-fifths (37%) of buyers would not have been able to purchase a property without the support of Help to Buy, which it estimates to have led to around 78,000 additional sales of new-build properties since the scheme started. In addition to this, the scheme has helped younger buyers onto the property ladder, as 63% of first-time buyers were aged 34 and under.

While 81% of Help to Buy loans were provided to first-time buyers, the scheme was intentionally set up to be accessible to a wide range of property buyers. As a result, homeowners were able to use the scheme to purchase a larger or more expensive property, which resulted in 19% of buyers who previously owned a property using the scheme to buy, on average, more expensive properties than first-time buyers.

Furthermore, 31% of buyers said that they could have purchased the property they wanted without the scheme, which the report estimates to have led to 65,000 households using the scheme who could have purchased the house they wanted without it. In addition to this, over the whole scheme, 10% of buyers had household incomes over £80,000 (or over £90,000 in London).

According to the report, 5% of buyers were in arrears who bought in the first 11 months of the scheme, which is above the national average as according to figures from UK Finance, in the first three months of 2019, 2.5% of homeowners were in mortgage arrears. These homeowners may find themselves in difficult circumstances as the report states that buyers who want to sell their property soon after they have purchased it might find themselves in negative equity, mainly due to the fact that new builds typically cost 15-20% more than an equivalent ‘second-hand’ property.

The news that a cross party group of MPs has launched an inquiry into the plight of mortgage prisoners has brought hope to many of those ordinary people trapped in their current deal.

The problem of mortgage prisoners has its roots in the global financial crash of 2008. Prior to this point lenders had a more relaxed approach to checking that customers could afford the mortgages being offered. Following the banking crisis, the Financial Conduct Authority (FCA) made these regulations much more stringent, with the aim of preventing borrowers obtaining mortgages which they couldn’t afford.

While these tougher rules have worked to prevent consumers from over-reaching themselves on their mortgage commitments, it has left many thousands in the trap of being unable to obtain a new remortgage deal – even though they might well have had no problems with their mortgage repayments and are in good standing with their lender. Being unable to move to a new deal because they cannot pass the new affordability checks leaves those affected stuck on a higher standard variable rate (SVR) paying potentially thousands more per year.

However, the good news is that last week the All-Party Parliamentary Group (APPG) on Mortgage Prisoners submitted a cross-party motion designed to begin scrutinising what can be done to assist those trapped on higher rate mortgages. It is hoped that by stepping up pressure on both the FCA and the Treasury some people in the UK can be freed from their current mortgage prisons.

If you are a mortgage prisoner the APPG is interested in hearing your story, please email them at APPGmortgageprisoners@gmail.com . If you need help to remortgage please speak to our preferred mortgage broker for advice.

 

 

Product competition in the buy-to-let (BTL) market has increased significantly and is at its highest level since the beginnings of the financial crisis in October 2007, data from the Moneyfacts UK Mortgage Trends Treasury Report will show.

The report, which is not yet published, shows that there are currently 2,396 BTL products available, which is the most competitive the market has been since 3,305 products were available in October 2007. In addition to this, since June 2018 competition has intensified, with the number of products available increasing by 21%, while in the past month alone it has risen by 143 products, from 2,253 to 2,396.

Despite the increase in competition, the average BTL mortgage rates have risen over the past 12 months, with the average two-year BTL fixed rate mortgage increasing by 0.17% from 2.88% in June 2018 to 3.05% this month, while the average five-year BTL fixed rate has risen by 0.11% to 3.54%, compared to 3.43% in June 2018. Saying this, both rates are still significantly lower than in October 2007, when the average two-year BTL fixed rate stood at 6.36% and its five-year counterpart stood at 6.39%.

  All available BTL products Two-year fixed rate BTL mortgage Two-year fixed rate BTL mortgage Five-year fixed rate BTL mortgage Five-year fixed rate BTL mortgage
  Product numbers Product numbers Average rate Product numbers Average rate
Oct-07 3,305 409 6.36% 181 6.39%
Jun-18 1,929 678 2.88% 637 3.43%
May-19 2,253 739 3.02% 730 3.53%
Jun-19 2,396 802 3.05% 785 3.54%

Darren Cook, finance expert at Moneyfacts, said: “The BTL market has experienced a number of regulatory changes during recent years, however, it seems that product competition within this specialised mortgage area is continuing to grow. A 21% increase in availability to 2,396 products over the past 12 months indicates that providers are keen to offer potential BTL investors plenty of choice within the sector.

“Despite this increasing competition in terms of the total number of products available over the past year, average rates have unfortunately not fallen, and have instead followed suit, with the average two-year fixed rate increasing by 0.17% to 3.05% and the average five-year fixed rate increasing by 0.11% to 3.54% over the same period.

“The largest concentration of BTL product choice can be found at the maximum 75% loan-to-value (LTV) tier, where there are currently 352 (44%) two-year fixed rate products available and 374 (48%) five-year fixed rate products available. Coincidently, the average fixed rates at the 75% LTV tier for the two and five-year sectors are currently 3.05% and 3.55% respectively, equalling or near-equalling the average rates for both terms across all tiers.

“The increase in the BTL average rates contrasts with the downward trajectory of their residential mortgage counterparts, where product competition seems to have instead resulted in rates falling. This disparity in trends is likely to be attributed to the different approach lenders take to risk between these two sectors, and that economic uncertainty may be having a more adverse influence on the BTL mortgage market than it is having on the residential mortgage market.”

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