Mortgage rationing to continue next year

Officials from the Council of Mortgage Lenders have stated in a recent report that mortgage rationing is set to continue next year, and consumers that are hoping to get mortgage finance in order to get onto the property ladder may still face disappointment as banks continue to slash their lending.

One of the problems facing the banking industry is repayment of some of the bailout money that they took at the height of the global financial crisis, which needs to be repaid. Sadly, it is likely to be consumers that pay the price once again, as this will result in further restrictions on mortgage and other types of lending, making things more difficult for those that need to take out finance.

The CML has also said that repossession numbers are likely to increase next year, although the increase is likely to be modest. There are a number of factors that may affect repossession numbers, and this includes the government Spending Review and cuts, which could affect people’s jobs. Buyers are also likely to be put off from taking out mortgage finance even if they are able to get it, and this is due to the fragile state of the economy.

The CML said: “Given the continuing economic uncertainties, there is little to encourage buyers. First-time buyers will continue to find it difficult to get into the market. With funding in short supply, the availability of mortgages for first-time buyers will remain limited.”

The Council of Mortgage Lenders concluded: “Activity in housing and mortgage markets is set to remain broadly flat in 2011 and we do not envisage a return to the lending levels that characterised the middle of the last decade for many years to come.”

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CML revises repossession forecasts again

It has been reported that the Council of Mortgage Lenders has once again cut its forecasts for repossession numbers in the UK, having taken more recent industry figures and market conditions into consideration. Read more

Tags: Business Finance, cml, council of mortgage lenders, quarter, repossessions, Mortgages, CML revises repossession, time

Effects of credit squeeze ‘hard to predict’

How long the impact of the global credit squeeze on the mortgage markets will last is not easy to forecast.

According to the Council of Mortgage Lenders (CML), it is not yet clear how long the credit problems will continue to affect the number of mortgage products on the market.

Bernard Clarke, a spokesperson for the CML that there is uncertainty over when the credit market will return to “normality” and if that “normality” will be the same as before credit crunch.

“There are implications within that for lenders operating in wholesale funding markets. The problems persist for now, and in the longer term we expect the wholesale funding market to improve and become more liquid, but perhaps it will not be as liquid as it was before,” he said.

Commenting on whether the credit squeeze will affect the types of products on the market, Mr Clarke added that time will tell how the government will set out to promote people taking on fixed-rate, long-term mortgages.

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CML: Bridging loans “useful” despite reputation

Despite their bad reputation, bridging loans remain the “obvious choice”, said the Council of Mortgage Lenders (CML) today.

Loans used to cover the period between buying a new property and selling your old one are not well respected due to their expensive entry and exit fees and high interest rates.

However, a spokesperson for CML explained that, while they do not offer long term solutions, bridging loans are the “main and obvious route where there is a mismatch”.

She added: “Because bridging is an expensive form of property finance, it is ideally the case that the borrower and the finance company should have a clear view as to what the exit strategy from that bridging finance deal is.

“It shouldn’t necessarily be seen as a long term solution to any property-related transaction.”

Additionally, she warned that entering this type of agreement “does not make any sense” for people who do not know what their “subsequent rollover strategy” will be.

The CML is the trade body for mortgage lenders. Members make up 98 per cent of total mortgage lending in Britain.

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Buy-to-let lending continues to thrive

Buy-to-let mortgage lending is booming, in spite of widespread concern about the state of the market.

With the Royal Institution of Chartered Surveyors (RICS) warning that house prices are falling at their fastest rate for two years yesterday, many believe that the buy-to-let sector will contract.

However, new data published this week suggests that many investors continue to believe that buy-to-let remains a good deal.

New figures from the Council of Mortgage Lenders (CML) showed that £7.8 billion was taken out in loans under their ‘other lending’ category in August – of which buy-to-let is a major component.

The sum makes up almost 25 per cent of the £34 billion borrowed that month, and is 37 per cent up on the figure for the previous month.

The CML said: “Total lending has been buoyed by a strong buy-to-let market.

“[Other lending] covers buy-to-let which has continued to be underpinned by house price increases, tenant demand, rent increases and landlords’ willingness to take long-term investment decisions.”

In the same period, the CML’s figure showed that borrowing for new purchases fell by 11 per cent on the previous month, while remortgaging borrowing fell by 12 per cent.

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Bank holds interest rates

The Bank of England’s monetary policy committee (MPC) has decided to keep interest rates at 5.75 per cent for at least the next month.

Although rates have not risen since July, that was the fifth rise within 12 months and there were concerns earlier in the year that rates would hit six per cent before the end of 2007.

However the inflation rate currently sits at 1.9 per cent, below its target level of two per cent and the current problems in the financial markets are making further rises less likely.

In a statement that accompanied the decision, the MPC said that it had considered carefully the effects that recent credit market problems, brought about by the collapse of the US sub-prime borrowing market, could have on the inflation rate.

Responding to the news, the Council of Mortgage Lenders (CML) welcomed the bank’s decision to hold rates steady at 5.75 per cent.

Micheal Coogan, director general of the CML, said: “Credit conditions have tightened since the rate went up in July, and a further increase would have added to the liquidity problems we are already seeing in some sections of the market.

“At the same time, there is now much clearer evidence that the cumulative effect of five rate rises since last August is slowing activity in the housing market.”

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BTL “stabilises” prices

Although borrowing costs are rising due to the five separate interest rate rises in the past year – which some say could lead to house market turbulence – the continuing strength of the buy-to-let market is providing much-needed stability.

That is the contention of Paragon, whose Buy-to-Let index for July was released today.

According to the index, rents have risen by just over three per cent over the past three months, boosting the annualised growth rate to 12 per cent.

This comes at a time in which the general housing market is widely recognised by analysts to be slowing.

Chief executive of Paragon Group Nigel Terrington, commenting on the new index, said: “Buy-to-let provides housing for young people, who otherwise would be forced to buy and be stretched beyond their means. It would result in dramatically higher levels of repossessions in the housing market.

“As owner occupiers are increasingly struggling under the weight of higher borrowing costs, buy-to-let landlords can provide accommodation for the growing number of young people who want a flexible lifestyle or who aren’t yet ready to step on the property ladder.”

Figures covering the first half of the year from the Council of Mortgage Lenders (CML) have also recently revealed that the buy-to-let market took up 12 per cent of total mortgages in Britain – a record amount.

Tags: Youth, rate, Nigel Terrington, landlords, cml, investment, property ladder, Real estate economics

CML chief: Housing market to come off boil

The director general of the Council of Mortgage Lenders (CML), Michael Coogan, has claimed that house price inflation will cool off dramatically next year.

Speaking to Reuters, he said that prices seem likely to record their smallest increase in a decade, at maybe just two to three per cent, partially due to rises in interest rates.

The Bank of England set the new base rate at 5.75 per cent two weeks ago – the fifth rise in a year – and many analysts predict further increases in coming months.

Mr Coogan counselled against fears of a slump in prices: “I don’t believe there will be a crash. But clearly a slowdown is more likely”, he said, pointing to the still robust economy as a bulwark against forced house sales.

He added that “we’ve already seen on the consumer credit side that loans have been reduced and people are looking to repay their credit card and other debts… That trend is likely to continue.”

The prospect of a dramatic slowdown seems distant, however: Figures released by the Department of Communities and Local Government today show still-strong inflation, with annual house price rises remaining in the double percentage figures: inflation in prices stood at 10.9 per cent in May, against 11.3 per cent the previous month.

The figures also showed regional variations – with inflation particularly strong in London, Scotland and Northern Ireland.

http://uk.reuters.com/article/personalFinanceNews/idUKNOA64267220070716?rpc=401&
http://business.timesonline.co.uk/tol/business/economics/article2083427.ece

Tags: consumer, crash, ece, price, cml, I don't believe

Repossessions grew in 2006

More people had their homes repossessed as 2006 drew to a close, according to the latest statistics.

The Council of Mortgage Lenders (CML) has released its statistics for the year and they do not make good reading for people struggling to keep up with their mortgage repayments.

According to the CML, 8,860 homes were repossessed in the final six months of 2006, compared to 8,140 in the first six months. The reason for the rise is being put down to increased interest rates and the CML is expecting more repossessions in the coming years.

The organisation is predicting that things will continue to get worse for homeowners, with an expected 19,000 repossessions in 2007 and 20,000 in 2008.

Despite the apparently bleak figures, the CML points out that the 8,860 repossessions at the end of 2006 was fewer than had previously been predicted.

“The arrears picture at the moment is fairly complex,” commented Michael Coogan from the CML. “On the one hand, the wave of problems caused by previous interest rate rises has now worked through, so recently arrears levels have fallen.

“On the other hand, interest rates are rising again, and payment shock may be an issue for some this year as their existing fixed or discounted deals expire.”

Those considering taking out a mortgage are advised to borrow within their means and ensure that they have enough financial clout to deal with any large interest rate rises that may come up in the future.

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