Mortgages and lending for house purchase in the UK  increased slightly from April to May, according to the Council of Mortgage Lenders, whilst remortgaging dropped.

Mortgages for residential purchases increased by 4% up to 52,700, and by 2% in value to £7.9 billion  although both were almost down 50% on  May last year. However, there was a massive drop in remortgaging from April to May. There was only  71,000 loans for remortgage, down 14% from April and 23% from May 2007. The value of remortgage lending dropped by 13% in May to £9.6 billion, which represented 39% of all lending in the UK compared to 42% in April.

The number of mortgages for first-time buyers rose by 4% from April to 19,200, but was 41% lower than May last year. Home movers took out 33,500 loans, up 4% from April, and down 46% from May last year. Gross lending declined to £24.5 billion, down 6% from April and 22% from May last year. This is the seventh consecutive month that gross lending has been lower than its position a year before.

The most recent information on  mortgage approvals from the Bank of England shows that the number of loans for house purchase will fall further still in coming months. Read the rest of this entry »

Mortgage Lenders are cracking down on customers who are applying for interest-only mortgages with fewer mortgage applications being approved, analysis from Mform.co.uk showed.

Data from the Council of Mortgage Lenders, which compare January to April 2008 with the same period last year, show that 20,400 interest-only loans for house purchases were approved this year compared to 31,300 in 2007.Mform.co.uk says its own data for remortgages shows that 25.7% of applications through its service were for interest-only loans in the first six months of 2008, compared with 30.4% in 2007.

The online mortgage company warns that lenders are becoming stricter on approving interest-only mortgage applications as lending criteria is tightened, despite the attractions for borrowers of switching to interest-only mortgages to stave off the impact of payment shock.

Switching to interest-only from a fixed rate can save around £2,400 a year in mortgage payments on a £150,000 loan at 7%, mform.co.uk calculates.

The website says that on a repayment basis, monthly payments would be £1,072.63 compared with £875 on an interest-only basis.

Francis Ghiloni, marketing and business development director Mform.co.uk, says: “Lenders are becoming more cautious about interest-only mortgages because of worries about house prices and our experience is that increasingly, borrowers are becoming more cautious too.

“That is not to say that switching to interest-only is necessarily wrong. The worry is when borrowers do not have a method of repaying their loan in place. Read the rest of this entry »

Signs of a recovery in the mortgage market is still “some way away”, according to the Council of Mortgage Lenders (CML).

The statement came as figures showed the number of mortgage lending for home purchases remained low in May at 52,700.

This was a small  rise from the previous month of 4%, but was still 44% lower than the same time last year.

The figures also  revealed a massive decline in the amount  of people remortgaging in May - down 14% on the previous month and 23% lower year-on-year.

“Lending levels continue to be lower than last year and any recovery is still some way away,” said CML director general Michael Coogan.

The CML said the situation was likely to “get worse before it gets better”, with first-time buyers facing having to find larger deposits and needing a good credit rating to get a foothold on the housing ladder.

The amount  of loans to first-time buyers rose by 4% from April to 19,200 in May, but was 41% lower than May last year. These buyers generally borrow nearly 3.5 times their income..

Recent mortgage approvals data from the Bank of England indicated that the number of mortgages for house purchase would fall further in coming months, the CML said.

The CML data relates to mortgage  completions, as does the latest survey of house prices released by the Department for Communities and Local Government (DCLG).

This showed that annual house price growth has  slowed, down from 4.9% in April to 3.7% in May.

Annual house price growth was highest in Scotland, at 6.9%. Prices in England went up by 3.8% and were up 1.5% in Wales, but prices had fallen by 7.8% in Northern Ireland.

The average cost of a home in the UK was £218,151 in May, the DCLG said. Read the rest of this entry »

Abbey is adding some long term fixed rate deals to their range of mortgages today two 10-year fixed rate mortgage deals.

It is also dropping  the rates by up to 0.2% on a number of 75% LTV fixed and tracker mortgage deals. Read the rest of this entry »

Bradford & Bingley the UK’s biggest Buy to Let mortgage Lender has confirmed that its plan to raise £400m has been rescued by a group of UK investors.

Bradford & Bingley’s plans were put into chaos after US private equity firm Texas Pacific Group  walked out on a deal to pay £179m for a 23% stake in the UK Mortgage  lender.

The mortgage lender will now try and raise capital by  selling £400m of shares in a rights issue, which is supported by Standard Life, Legal & General, M&G and Insight Investment.

As  shares fell for the UK Mortage Lender by as much as 14%, dropping below the rights issue price level.

A rights issue is when a company offers shares at a cheaper price  to existing share holders, giving them the opportunity to increase their holdings and raise money for the company to use to shore up its balance sheet.

Bradford & Bingley is offering share holders its new shares at a “knock down” price of 55 pence per share.

In recent trading they were down 4.5 pence, or 7.4%, at 56.5p. But in early exchanges, they dropped to as a low as 52p.

Bradford & Bingley is  one of the UK’s biggest buy to let mortgage lenders, is looking to raise money because the group has been hit by the credit crunch crisis and the sharp slowdown in the property market.

Texas Pacific Group walked away from the  deal to buy the a stake of 23%  in Bradford & Bingley after Moody’s, the credit rating agency, announced it was downgrading the long-term debt of the UK mortgage lender.

This left B&B with a massive black hole in its plans to raise cash.

BBC Business editor Robert Peston said the City watchdog, the Financial Services Authority, played a central role in helping to organise what will be seen as an emergency fund-raising.

“It would have been disastrous for confidence in the bank if new money was not found to replace TPG,” our correspondent said.

To fill the funding gap, B&B decided to increase its rights issue from £258m to £400m, and got the backing of Legal & General, Standard Life, M&G and Insight Investment.

The group of companies helping rescue B&B are the firm’s largest shareholders. They were also the backers of a plan by Clive Cowdery, head of investment group Resolution, to acquire a controlling stake in B&B.

However, B&B rejected Mr Cowdery’s plan last week.

‘Substantial deterioration’

B&B said the rights issue would be underwritten by the investment banks, Citigroup and UBS.

The firm’s executive chairman Rod Kent said: “B&B continues to be well funded and the capital raising will reinforce our position as one of the better capitalised banks and one of the leading mortgage and savings banks in the UK.” Read the rest of this entry »

The Chancellor Alister Darling today warned mortgage lenders that they need to stop ripping off their customers during the hardships of the Credit Crunch. 

Darling  stated that he was aware that some mortgage lenders were upping mortgage arrangement fees. The average mortgage arrangement fee for a fixed rate mortgage deal is now £860, thats an increase of  66 per cent in the last 18 months. Times are difficult enough for consumers and mortgage advisors without mortgage lenders increasing fees. Read the rest of this entry »

The amount and availability of mortgages is expected to fall even  further in the third quarter, lenders have told the Bank of England.

Lenders say they will squeeze the availability of mortgages in July to September, the Bank’s Credit Conditions Survey says. Read the rest of this entry »

House prices fell by 0.9% last month, less than 50% of the rate of the previous month according to Nationwide Building Society. While prices are 6.3% lower than this time in 2007, they remain 4% higher than 2 years ago. Read the rest of this entry »

Mortgages should be reasonable  straightforward - you want to  borrow money to buy a house and pay interest on the loan. You soon realise that it’s not so simple as that. In a large competitive mortgage market, banks and building societies are continually updating their range of mortgages. The list is enough to baffle all but the most determined. The most important points are how you pay back the capital you borrow and how you pay the interest on it. Paying back the capital You can either pay a bit at a time as you go (repayment mortgage) or pay it all off at the end (Interest only).

Repayment mortgages

Each payment every month  pays off a little of the Capital on the mortgage loan, as well as interest on the mortgage. At the end of the term the mortgage is paid off. This is widely considered to be the most easy to understand and least risky mortgage type. But remember if you do not keep up with repayments the lender can repossess the property.

Interest only mortgages

 With Interest only mortgages, you pay-off the interest on the loan but not the capital. At the end of the mortgage term you are expected to repay all of  the capital, how you fund this is up to you. Interest only mortgages have grown in popularity in recent years amongst buy-to-let investors and first-time buyers in particular because, put simply, they are cheaper than a repayment mortgage. However, some experts are concerned that many people taking out an interest only mortgage are not giving enough thought as to how they will repay the capital. Read the rest of this entry »

The number of new mortgages which have been approved for house purchases in the UK  has dropped  again.

The Bank of England said 42,000 mortgages were approved in May 2008, a 28% fall compared with April and 64% down on a year ago.

This is the lowest amount of approved mortgage applications since the Bank began reporting on the mortgage figures in 1993 and lower than many predictions.

Mortgage lending has dropped  due to the credit crunch with banks and building societies reducing their willingness to lend for mortgages.

The number of mortgage deals  approved have now fallen for 13 consecutive months in a row.

Philip Shaw, chief economist at analysts Investec, described the figures as “terrible”.

“It is really symptomatic of what is going on the housing market. The real danger is there is a knock-on effect to consumer activity,” he said.

Recent figures from the British Bankers’ Association (BBA) on the number of new mortgage approvals to home buyers also showed a huge drop, by 20% in May compared with April.

Tighter lending criteria was to blame and the crunch on household finances for the drop. BBA members account for about two-thirds of total UK mortgage lending.

The Council of Mortgage Lenders and the Royal Institution of Chartered Surveyors have warned that property sales this year would fall by between 35% and 40%.

The Land Registry revealed last week that the number of house sales slumped by 50% in March compared with the same month in 2007.

The Bank of England figures also showed a drop in the number of mortgage approvals for homeowners who were coming to the end of their headline rates and remortgaging. Read the rest of this entry »