Housing & mortgage round upThis week sees the UK’s two largest mortgage lenders disagree about the direction of house prices, whilst new figures show just how hard life is for first time buyers, whilst the buy to let mortgage market continues to boom.

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House price confusion as Halifax report dip in October

Last week the Nationwide Building Society announced house prices had risen by 0.6% in October, this week it is the turn of the Halifax to report their figures, and they make very different reading.

According to the Halifax’s house prices actually fell by 0.7% in October and are down 1.7% year on year, taking the average house price to £158,426; nearly £7,000 below the figure given by the Nationwide.

The Halifax’s figures also seem to indicate that outlook for house prices is getting worse, not better, with the majority of the 1.7% fall occurring in the past few months.
Housing Economist at the Halifax, Martin Ellis, said: “Signs of a modest deterioration in the trend in house prices continued in October. Prices in the three months to October were 1.2% lower than in the preceding three months. This was the fifth successive decline in this measure of the underlying trend.”

Ellis continued: “Recent encouraging developments relating to the level of overall economic activity and conditions in the labour market, however, may help to support demand and underpin house prices around current levels over the coming months.”

Mortgage rationing still a problem

Doubt was also cast this week on whether the government’s £60 billion Funding for Lending Scheme (FLS) is helping to improve the availability of loans for those people excluded from the mortgage market after the credit crunch.

The aim of the FLS, which started on 1st August, is to provide lenders with a cheaper source of finance, allowing them to lend at lower rates, to a wider range of individuals and businesses. However, new figures from Moneyfacts show that the scheme might not be as effective as the government would have hoped.

The research shows that the availability of higher loan to value mortgages, typically used by first time buyers, is not improving; over two thirds of mortgages available in November requiring a deposit of at least 20% and the situation changing little over the course of the past month.

It seems as though mortgage lenders are simply dropping interest rates on existing deals, rather than opening up mortgages to a wider range of people, meaning that the FLS is not actually making mortgage finance more accessible, just cheaper for those people who could already get a loan.

Perhaps bucking the trend are the Co-operative Bank, who have signed up to the FLS and have announced this week that they will be offering a cheaper mortgage to people with only a 10% deposit.

Only time will tell whether other mortgage lenders follow the Co-operative’s lead, first time buyers will certainly be hoping that as more lenders sign up the FLS helps to improve their options.

Buy to let mortgages surge

New figures have shown that the buy to let mortgage market is surging ahead, with 8% more lending in the third quarter of 2012, compared to the previous three months and a staggering 19% year on year rise.

The figures from the Council of Mortgage Lenders (CML) show that buy to let lending rose in the third quarter of 2012 to £4.2 billion, with 34,400 applications approved.
Many experts are putting the growth down to investors seeking to take advantage of low property prices, all time low interest rates and also to diversifying away from more traditional investments, often with an eye to planning for retirement.

However, the increase in buy to let activity is not good news for first time buyers, who traditionally compete for smaller properties which also make an ideal investment for landlords. As we have already seen, first time buyers are finding it tough to get a mortgage that will allow them to buy their first property. It now seems that even if they can find a loan, they will face stiff competition from buy to let landlords, which ultimately could push prices up in this part of the market, further excluding first time buyers from getting onto the housing ladder.

Paul Smee, of the CML, said: “Buy-to-let lending is continuing to recover, and to grow in line with expectations. As well as continuing to fund owner-occupation, lenders are contributing to the expansion of a strongly growing rental sector, helping to deliver choice and mobility for tenants.”

He continued: “The growth of private renting looks set to continue in the years ahead, and lenders are committed to playing a full part in the debate about how best to meet the evolving needs of tenants in the future.”

Bank of England leaves interest rates on hold

As expected the Bank of England’s Monetary Policy Committee (MPC) has voted to keep interest rates on hold at 0.5% for a further month.

The MPC has now left interest rates unchanged since March 2009, good news for borrowers with tracker mortgages, linked to the base rate.

Repossessions at record low

New figures, again from the Council of Mortgage Lenders (CML), have shown that repossessions have fallen to a five year low.

The CML figures show that 8,200 homes were repossessed in the third quarter of 2012, the lowest level since 2007 when the current housing slump started.

In a further sign that most people are being able to manage their mortgage debt, the number of borrowers in arrears stayed broadly stable.

The figures are part of a downward trend in the number of repossessions, bought about by the low interest rates seen over recent years and a greater reluctance from mortgage lenders to repossess. It also seems that even the CML have overestimated the problem, forecasting that 45,000 homes would be repossessed in 2012; so far, after nine months, the figure stands at just 26,300.

In a busy week, Paul Smee, of the CML, said: “Our figures show that good communication and effective arrears management by borrowers, lenders and money advisers are helping the vast majority of those with mortgage repayment problems.”

He continued: “The rate of repossession has continued to fall and it’s clear that lenders want to keep people in their homes.”

Our mortgage adviser, Linda Wood , is here to help you. If you would like advice on your options or you are affected by any of the stories in this week’s housing round up please call  Linda  today on 0115 933 8433, alternatively enquire online  or email linda.wood@investmentsense.co.uk

Your home may be repossessed if you do not keep up repayments on your mortgage.

For providing mortgage advice we will charge an application fee of £300 and we may also be paid a fee from the lender, any fee paid by the lender will be disclosed to you. Alternatively we will charge an arrangement fee of 0.5% of the loan and refund to you any payment received by us from the lender.

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