Mortgage watch

Mortgage watch

The UK housing market is at risk of becoming unsustainable unless reform happens, Stephen Smith of Legal & General has warned.

L&G’s director of mortgage club and housing, said: “Maintaining the momentum of house building is crucial to creating a sustainable market that is accessible to first-time buyers, and offers current homeowners more mobility.”

Mr Smith’s comments came as the ONS announced house prices across the UK had increased 10 per cent in the year to November 2014.

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In November prices paid by first-time buyers were 11 per cent higher on average than in November 2013. For owner-occupiers prices increased by 9.5 per cent for the same period.

The ONS figures show house price yearly inflation was 10.4 per cent in England, 3.1 per cent in Wales, 4.4 per cent in Scotland and 11.7 per cent in Northern Ireland.

Yearly house price increases in England were driven by an annual increase in London of 15.3 per cent and to a lesser extent increases in the east – 11.9 per cent -– and the southeast – 10.8 per cent.

Meanwhile the CML released figures showing a decline in lending trends to first-time buyers, home movers and remortgaging, but a year-on-year increase in buy-to-let lending.

There were 25,900 first-time buyer loans in November – down 11 per cent on October, and 3 per cent down on November 2013.

Some 17,700 buy-to-let loans were approved in November, representing lending of £2.4bn.

This was a decrease on the previous month, with loan volumes down 10 per cent, but compared with November 2013 the number of loans increased 9 per cent.

Paul Smee, director general of the CML, said: “The easing back of activity is not completely unexpected as there is usually a seasonal lending dip in the winter months, and the major industry changes and more restrained market sentiment have inevitably caused month-to-month fluctuations over the past 12 months.”

First-time buyers, lending and affordability

Number of loansValue of loans, £mAverage loan to valueAverage income multipleProportion of income spent on interest paymentsProportion of income spent on capital and interest payments
November 201425,9003,80083%3.3711.6%19.3%
Change from October 2014-11.3%-11.6%84%3.3911.9%19.5%
Change from November 2013-3.4%5.6%80%3.3811.3%19.1%

Source: CML

Adviser view

Colin Payne, associate director of London-based Chapelgate Private Finance, said: “It was not unexpected that home loans to first-time buyers was down 3.4 per cent on November 2013. The help-to-buy scheme had started a year earlier and proved an instant success, with both RBS and Halifax taking almost 2500 applications in the first month.”