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  • Property-a-holics

    Market News...Or food for thought!!!!

    At long last lots of positives in this week’s news. CML and even US President Barack Obama have come to the fore to say the words that everyone has long been waiting for, that things are starting to pick up.
    The Council of Mortgage Lenders has reported a 4% increase in mortgage lending in February, with 24,300 house purchases in the month worth £3.1 billion, compared to 23,400 loans worth £3.1 billion in January. There has been a shift from tracker products towards fixed rates, with 56% of new loans being a fixed-rate product, which is up from 49% in January. Tracker products were 31% in February, down from 38% in January. Meanwhile remortgaging declined steeply with 35,000 remortgage loans, down from 44,000 in January, which CML put down to SVRs being so attractive.
    Director General of the CML, Michael Coogan said: “These figures represent February mortgage completions. Recent mortgage approvals figures published by the Bank of England show some signs of improvement at the beginning of the borrowing process, although activity is at a very low level historically. We are not convinced that underlying trends have shifted sufficiently to change our forecasts for mortgage market activity in 2009, but there are some positive signs for later in the year”.
    He added: “Some large banks are making more funding available through enhanced lending commitments, which is helpful but will not satisfy consumer borrowing demand on its own. We need further market measures to be introduced by the government around the Budget to encourage a mortgage market where all types of lenders – banks, building societies and specialist lenders, and large and small businesses – are encouraged, and enabled, to commit more funds to the mortgage market if we are to enhance lending activity significantly”.
    Stateside, President Obama has said that there are “signs of economic progress” but underlined that times remain tough. Whilst retail sales for March suggest that consumers are continuing to be cautious, Mr Obama felt that the US government’s housing plan was a factor in boosting the economy, as the number of people refinancing their loans increased. But he also warned that more work needed to be done and that “credit was not flowing nearly as easily as it should” He also said that 2009 would be a hard year for the US economy, when there would be more job losses, more repossessions and “more pain before it ends”. So a very similar story to the UK economy and a positive message, which should give reassurance for the recovery of the UK mortgage market.
    In addition, David Miles, an incoming member of the Monetary Policy Committee (MPC) of the Bank of England has said that the signs are there that the worst of the British recession was over. His comments came after the European stock markets jumped sharply after a string of upbeat trading statements led by Nokia and Harley-Davidson.
    On the buy to let front, reports from Paragon Mortgages show that an increase in mature students is helping landlords in university towns. There has been 12.9% increase in applications from the 21-24 age group to attend university in the 2009/10 academic year, whilst the number of applications from people over the age of 24 has risen by 12.6%.
    Managing Director of Paragon, John Heron sees the increase is likely to be due to the weaker employment market. He say’s: “This demand is not only good news for landlords that focus on the student lettings market, but also potentially landlords in the wider vicinity of the university. As universities expand, demand for good quality accommodation also increases, which should filter through to rental income. More students may also be prepared to travel further to get to university, so may look to rent property away from the main student locations, therefore boosting demand more generally”.
    No surprises that mortgage applications rejections are on the increase according to comparison website Moneysupermarket. They claim that lenders have turned down almost 9% of qualifying mortgage applications this year, compared to 2.3% in 2007. They state that all of the applications were vetted prior to submission and appeared to match the product criteria, but were subsequently rejected when lenders found further reasons to throw them out.
    Head of Mortgages at Moneysupermarket said: “Lending criteria has become too strict. Credit histories play an important part in the process and any blemishes will make finding a mortgage increasingly difficult. Assessing affordability is key for lenders and everyone has to be more realistic about what they can borrow. The most anyone can reasonably hope for is four times salary”. How times have changed!
    And finally, research from First Direct indicates that canny homeowners who are planning to move up the property ladder are waiting for prices to hit rock bottom before jumping into the market. As many as 2.5 million people are sitting on a pot of £20billion. As a consequence “the economy could experience a much-needed boost in the coming months”. Just the kind of news that we like to hear!
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