MortgagesFeb 28 2014

Month in Mortgages: Pre-crisis positivity belies bumpy road

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Vital statistics

The month ended with the Bank of England projecting an increase from 70,000 mortgage approvals for home purchase in the first quarter of this year to 90,000 approvals in the second quarter, marking a return to pre-crisis levels of approvals.

However, the Council of Mortgage Lenders was quick to slightly dampen mortgage advisers’ spirits by warning about a limited supply of abodes.

Bob Pannell, chief economist at the Council of Mortgage Lenders, said: “This would seem to imply property transactions running at an annualised rate of 1.5m or so. We think this may be over-optimistic, given the growing anecdotal reports of a shortage of prospective sellers.”

Help to Buy casts a wider net

Much was made, once again, of the Help to Buy effect on making consumers realise they can get a foot on the ladder if they desire to. Official statistics now apparently show 100,000 homebuyers have been brought back to the market by the initiative.

And the government continued to ensure Help to Buy mortgages made headlines and makes consumers visit mortgage advisers by confirming the scheme can now be used by providers of Sharia-compliant Home Purchase Plans, often referred to as ‘Islamic mortgages’.

The rules have been changed to allow banks that sell HPPs to purchase a government guarantee for them. The Islamic Bank of Britain has said it intends to offer HPPs under the scheme.

Best price

For anyone looking to buy or remortgage this month, many lenders also reduced their fixed rates in a sign of a return to pre-crisis rate cutting.

We asked Ray Boulger, senior technical manager for John Charcol, and David Hollingworth, associate director of London & Country Mortgages, which deals caught their eye this month.

According to Mr Boulger the most interesting deal launched this month was Saffron’s 3.97 per cent two-and-a-half year (to 30 November 2016) fixed rate up to 90 per cent LTV contractor mortgage.

He says this deal was a market leading fixed rate at 90 per cent loan-to-value (LTV) combined with sensible contractor underwriting criteria.

Mr Hollingworth argues Hinckley & Rugby’s new fixed rates were the most interesting deals to be launched this month.

He says: “Hinckley & Rugby offers a very good package on its two-year fixed rate of 2.99 per cent to 80 per cent LTV with no fee, free valuation and free legal work for remortgage. There are also no early repayment charges at any time.”

Hinckley & Rugby’s 95 per cent LTV deal was also highly rated by Mr Hollingworth.

But the best 95 per cent plus LTV mortgage available this month, according to Mr Boulger, was Hanley’s 95 per cent LTV two-year discount at 4.19 per cent.

He says this deal was a “fantastic rate at 95 per cent LTV after a 70 basis point rate cut, despite not being a fixed rate”.

The best residential mortgage available this month overall, according to Mr Boulger, was Ipswich’s 1.97 per cent two-year fixed rate up to 75 per cent LTV. Available via PMS, Mr Boulger says this deal was a best buy at 70 per cent LTV as well as exceptional value at 75 per cent.

With a rate about 1.2 per cent below the best five-year fixed rate to 75 per cent LTV, Mr Boulger said this deal was cheap enough to be good value compared to longer term fixes.

Mr Hollingworth’s favourite residential deal was Coventry Building Society’s five-year fixed rate at 2.99 per cent to 65 per cent LTV with a £499 fee and the help with remortgage costs that come as standard on Coventry deals.

There was even the ability to take an offset version with an additional £500 on the fee.

Mr Hollingworth says: “Overall a great package and sadly couldn’t see out the month and has now been withdrawn.”

The best buy-to-let mortgage available this month, according to Mr Boulger, was Santander’s 3.99 per cent five-year fixed rate to 60 per cent LTV. Unlike many buy-to-let mortgages this has a flat rate fee (£1,495) and also a free valuation and £250 cashback for both purchases and remortgages.

Mr Hollingworth said it is a very competitive buy-to-let market at the moment but he felt Leeds Building Society deserved a mention.

The building society was offering a two-year fixed rate at 2.79 per cent to 60 per cent LTV with a £199 fee and free valuation and legal work.

Mr Hollingworth said: “That is an outstanding rate not especially with such low fees, ideal for landlords looking for a better rate. That has now been repriced to 2.99 per cent, which remains an outstanding offer.”

Get ready for your MMR jab

If lenders were repricing in a bid to attract more business, the Financial Conduct Authority reminded us some mortgage intermediaries look set to struggle to meet the demands of the Mortgage Market Review, which comes into force on 26 April 2014.

Around 3,660 mortgage intermediaries responded to the FCA’s second MMR readiness survey. The survey also found that 85 per cent of firms who conduct mortgage business are ready to implement the MMR on time.

A further 6 per cent of firms said they did not yet have plans in place for implementation but are confident they will be ready in time. Just 1 per cent of respondents said they would fail to meet the April deadline, but they will not be undertaking any mortgage business until they are ready.

The remaining 8 per cent of firms plan to exit the market ahead of MMR coming into force. The vast majority of these firms have written less than 100 mortgages in the last 12 months.