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Post Office steps up mortgage offer
The Post Office has stepped up its attempt to become one of the UK's
biggest mortgage lenders.
It is offering a mortgage deal that requires just a 10% deposit.
Unusually, the deal is available on an "interest-only" basis as
well as the normal "capital-and-interest" repayment method.
This will make it cheaper and easier for some borrowers to afford the
initial repayments.
"This is a totally different approach from the rest of the market and
will make their mortgages much more open to home buyers," said Aaron
Strutt of mortgage brokers Trinity Financial Group.
"Over the last few days, more lenders have reduced their mortgage
rates in an effort to attract more business including Nationwide, Abbey,
Northern Rock and a number of building societies.
"Virtually all lenders require mortgages over 75% loan to value (LTV)
to be on a repayment-only basis - that's why the Post Office rates would be so
different," he added.
Easing market
The new 90% loan is part of a revamped range of mortgages from the Post
Office .
Continue reading the main story Whilst there are existing 90% deals
available, many remain out of reach for most borrowers because the rates are
too high Marco Hughes
Post Office It started lending in 2007 on a trial basis, but committed
itself fully to the mortgage market last October.
"We are looking to be one of the top 10 lenders in the UK," said
a spokeswoman.
The Post Office loans, which can be applied for by post, internet and phone
or at its branches, are financed by the Bank of Ireland, with which the Post
Office has a joint venture.
The average deposit on a UK house purchase still stands at 25%, a level it
has been at since the credit crunch and banking crisis of 2007 and 2008 forced
lenders to start rationing their loans.
That level of downpayment is still required for 57% of all current mortgage
deals on offer.
However, the gentle easing of rationing in the mortgage market since the
start of the year means there are now more than 160 deals available that ask
for just a 10% deposit.
"Whilst there are existing 90% deals available, many remain out of
reach for most borrowers because the rates are too high," said the Post
Office's director of personal lending, Marco Hughes.
"Instead, we're offering more affordable rates that will allow more
borrowers the opportunity to take out a mortgage with a smaller deposit."
'Not a computer'
The interest charged by the Post Office on its two-year fixed rate, at 90%
LTV, is 5.45%.
However, its base-rate tracker at 5.49% is set at a margin of 4.99% over
the Bank of England's base rate, with no cap or ceiling.
A spokeswoman explained that while being offered "interest only"
deals, borrowers would still have to show they could eventually repay the
capital as well.
"We ask all the usual questions any responsible provider would, for
example assessing the value of the property, credit history, employment status
and salary, plus customers are required to provide details of their repayment
plan in order to ensure the loan can be repaid," she said.
"Importantly, each application with the Post Office will be manually
underwritten which means it is assessed by a fully qualified human being, not
a computer," she added.
Lloyds banking group
Meanwhile the Lloyds banking group, which includes the Halifax, has stopped
offering interest-only home loans worth more than half a million pounds.
The lender will now lend sums of this size on a repayment basis only.
And it will no longer accept the promised sale of the house or business, or
prospective inheritance, as proper repayment methods for any size of
interest-only loan.
"We have recently undertaken a strategic review of interest only to
ensure our products and procedures reflect the additional risks and
responsibilities associated with this type of lending," the lender said
in a message to mortgage brokers.
"It is important that repayment vehicles can provide certainty of
their future value," it added.
Mortgage lending down 12%
Gross mortgage lending declined to an estimated £10.2 billion in April,
down 12% from £11.6 billion in March and 1% from £10.3 billion in April
2009, according to new data from the Council of Mortgage Lenders (CML). This
is the lowest April total since 2000 (£9.3 billion).
A slight seasonal decline was expected as Easter fell in April this year.
Gross lending remains broadly in line with our forecast for lending of £150
billion for 2010 as a whole.
In today's market commentary, the CML notes that there have been signs of
increased mortgage availability in recent months with higher loan-to-value
mortgages becoming available and rates falling slightly. But it remains a
difficult market, particularly for first-time buyers without large deposits,
and lenders continue to face funding challenges. The CML says that the
imminent fiscal squeeze will drag on the speed of the recovery, which in turn
will slow the pick up in the housing market, although the Bank of England's
welcome of the plans to address the public finances is likely to mean that
interest rates can remain low for longer, which will help to support the
market.
CML director general Michael Coogan commented: "We welcome signs in
the coalition agreement that some housing priorities are on the government's
radar. But we still do not know how the incoming government plans to address
the funding gap looming over the next few years in the mortgage market. It is
important that the new government grasps this nettle. Unless funding issues
are addressed, any recovery in lending may well be curtailed as the repayment
date on the support schemes gets closer."
Rents start rising again as demand outstrips supply
A lack of supply is pushing rents higher, signalling a revival in the
lettings market, says the latest Lettings Survey from the Royal Institution of
Chartered Surveyors (RICS).
The net balance of Chartered Surveyors reporting rising rather than falling
rents rose from zero to 30% - a marked contrast to April last year when 58%
more chartered surveyors were reporting falling rents, an all-time low for the
survey.
Surveyors are optimistic that rents will continue to rise with the rental
expectations net balance climbing to 36% - the highest figure recorded in the
survey's history.
The more positive picture for rents can be attributed, in part, to the
continued decline in the supply of both flats and houses in the marketplace.
12% more Chartered Surveyors reported a fall rather than a rise in the number
of new landlord instructions for this period. The upturn in the housing market
has tempted many of the accidental landlords to sell up with new instructions
for sale on estate agents books now rising.
However, one consequence of the turnaround in the rental trend is that the
net balance of surveyors reporting an increase in gross yields has turned
positive for the first time in a year. Significantly, demand for property to
let remains strong with 30% more respondents still seeing it rise than fall,
the strongest reading since January 2009. Houses remain marginally more
popular than flats but flats are starting re-establish their appeal.
RICS spokesperson Jeremy Leaf comments: "With sellers back in the
housing market, supply has fallen back in the lettings sector. This is good
news for landlords as rents are set to move higher in the coming months and
yield returns are likely to improve. Moreover, the news that buy to let
specialists are beginning to lend again may also encourage investors to return
to the market.
However, the prospect of higher capital gains tax on the sale of property
may in the near term encourage some existing landlords to take advantage of
the current more benign tax regime."
CEBR predicts mortgage rates will fall to 3%
Average UK house prices will grow to be 5 per cent higher at the end of
2010 and mortgage rates are also likely to fall from a current APR of around
4% to about 3% by the first quarter of 2011. This is a key finding from the
latest Consumer and Housing Prospects report published by the Centre for
Economics and Business Research (CEBR) - one of the country's leading
economics consultancies and respected commentators on the UK housing market.
The forecasts are based on CEBR's updated UK economic forecasts released
earlier this month. These forecasts show sluggish GDP growth from 2011-14 as
the incoming government deals with its fiscal crisis and cuts public spending
and puts up taxes. Because of the sluggish growth, CEBR forecasts that base
rates will average 0.5% over the next 18 months and will only rise slowly
thereafter.
CEBR forecasts that average mortgage rates will fall by about 100 basis
points by early 2011 as the money markets price in the effects of cuts in the
government's budget deficit. cebr considers these cuts likely whoever wins the
election and these will have a 'triple whammy' effect on housing mortgage
rates. When the deficit cuts are made, rates will stay lower for longer than
is currently predicted, gilts yields will fall and more quantitative easing to
offset the sluggish economy will also affect the cost of money. The mortgage
rate spread over base rates will narrow as the markets price in interest rates
staying lower for longer. Currently the short run consensus base rate
expectation is 2.25% for end 2011 whereas CEBR's forecast is 0.5%.
CEBR's analysis indicates that base rates could be temporarily higher if
there is a hung parliament with a worst case possibility of 3.5% in mid year.
But these effects are expected to be only temporary and within 18 months rates
are likely to be back to more or less where they might have been with single
party government, after the bond markets force cuts to the budget deficit.
The factors driving up house prices are low mortgage rates keeping housing
affordability in as favourable a position as at any time since 2004 and a very
low rate of house building. On the other hand, cuts in public sector job
numbers and very low wage inflation will limit the scope for house price
inflation.
Benjamin Williamson, one of the report's authors and economist at CEBR
said: "A lot has happened to affect the housing market in the past three
months but the net effects have more or less cancelled each other out. A very
cold and snowy winter limited housing activity until well into the spring, an
effect exacerbated by the ending of the stamp duty holiday. Then, in the
budget, stamp duty was reformed, with a zero rate on properties below
£250,000 in value for First Time Buyers and a new 5% rate for properties with
values over £1 million. Yet we have only marginally revised our forecast from
a rise of 6% during 2010 to a rise of 5%."
Home Information Packs scrapped
The coalition government has suspended the use of Home Information Packs (HIPs)
by home sellers.
HIPs were introduced in 2007 in England and Wales.
The aim was to speed up the house selling process by obliging sellers to
provide much of the required conveyancing information when properties are
first put up for sale.
The packs are paid for by sellers and contain property information, title
deeds, and local searches.
"Today the new government is ensuring that home information packs are
history," said Housing Minister Grant Shapps.
"By suspending home information packs today, it means that home
sellers will be able to get on with marketing their home without having to
shell out hundreds of pounds upfront.
"We are committed to greener housing so from now on all that will be
required will be a simple energy performance certificate," he added.
Third of Brits admit they would avoid living near a Council Estate
A study by an online estate agent has looked at reasons people would not
buy a house, with 31% admitting that they would avoid buying a house if it was
close to a council estate.
In a survey of more than 1,700 Brits, www.HooplaHomes.co.uk has found that
just 69% of people said theyd be happy to live near a council estate, with
just fewer than a third of house hunters, 31%, admitting that theyd hate to
buy a house near a council estate.
The study, which was commissioned in a bid to find out the reasons that
would prevent a potential homebuyer from settling on a property, found that
crime rates were the most important issue to homebuyers when considering
location. 93% of people said that crime was the issue that concerned them the
most when choosing a new home.
Other reasons that would prevent house hunters from settling on a property
included the fact that somebody had died in the house and the proximity to a
graveyard, issues that 42% and 39% of people said would be a deciding factor
respectively.
Here is the top ten list of reasons that would prevent a homebuyer from
settling on a house, by the percentage of respondents that admitted the issue
would be a factor:
1.High crime rate 93% 2.Interior layout 91% 3.Lack of garden/small garden
87% 4.Close proximity to a main road 82% 5.Lack of good schools 79% 6.Close
proximity to airport 78% 7.Close proximity to bars and pubs 54% 8.Known death
in the house 42% 9.Close proximity to a graveyard 39% 10.Close proximity to
council estate 31%
11% of people said they would only move to a house they felt a connection
with.
Michelle Keene, Managing Director said,
"Buying a house is one of the most important decisions you will make,
and rightly so, house hunters want the perfect location preferably one that
isnt right next to a graveyard, according to these results!
"To find out that a third of people would avoid buying a house if it
was near a council estate is definitely surprising, and a fact that we hadnt
previously imagined would bother so many people. Its not for me or Hoopla
Homes to judge these facts though our sole aim is to provide people with a
cost effective way to sell their home with a view to finding their perfect
abode!"
Mortgage lending jumped to £11.5bn in March, a 24% rise from February
the Council of Mortgage Lenders (CML) said.
The figure was also 3% up on March last year, when the market had reached
its nadir in the wake of the credit crunch.
Despite this rise, the CML said activity in the property market was still
relatively subdued.
It pointed out that total mortgage lending in the first three months of the
year was still substantially lower than in the last three months of 2009.
"Despite the increase in activity late last year and a subsequent fall
early this year - due to the end of the stamp duty holiday - the underlying
position looks to have barely changed," said CML economist Paul Samter.
"But with the gradually improving economic backdrop and interest rates
still low, we continue to expect a gentle improvement in market conditions
later in the year," he added.
Spring revival
The property market appears to be picking up after its immediate
post-Christmas slump.
This revival would normally happen anyway during the spring.
The rebound has been exaggerated, though, by the near-freeze the market
suffered during January and February.
This was caused by the very cold weather and the aftermath of the rush to
beat the reintroduction of the old stamp duty threshold of £125,000.
Last week both the National Association of Estate Agents (NAEA) and the
Royal Institution of Chartered Surveyors (Rics) reported that March had seen a
big rise in the number of people putting their homes up for sale.
The most recent official figures have also shown that the number of
completed sales in the UK went up in February to 58,000, a rise of 15% from
January.
However this was still far lower than in the same month just two years ago,
when sales stood at 85,000.
Problem
The CML repeated its warning that a huge problem is looming over the
property market.
Mortgages permitting 90% LTV are significantly more expensive
David Black, Defaqto From 2011, lenders will have to find about £300bn to
repay the government for the money it lent them via its emergency support
schemes - the special liquidity scheme and credit guarantee scheme - at the
height of the banking crisis.
As such, mortgage lending will continue to be rationed, the CML said.
The government recently announced a further measure to prop up activity in
the market by abolishing, for two years, the 1% stamp duty band, for
first-time buyers only.
This means they can buy a home worth up to £250,000 without paying the
usual 1% property tax.
However first-time buyers continue to be asked to put down very large
deposits, typically running at an average 25% of the value of the homes they
are buying.
"The keenest rates are for those seeking a mortgage of less than 75%
loan-to-value (LTV)," said David Black at banking industry analysts
Defaqto.
"Mortgages permitting 90% LTV are significantly more expensive.
"First time buyers are particularly hard hit as they need a
substantial deposit merely to get on the housing ladder and a significantly
larger deposit to access the best rates," he added.
Housing market sees spring bounce, estate agents say
The number of people trying to buy or sell homes has picked up in the past
month, according to estate agents.
The number of potential sellers rose in March to its highest level for six
months, the National Association of Estate Agents (NAEA) said.
And the number of prospective buyers went up by 7% last month.
The NAEA said spring had brought its usual increase in activity, and
suggested sales would improve in the coming months.
"Spring has finally arrived and brought with it a much needed boost to
the housing market, particularly among sellers," said Gary Smith of the
NAEA.
"This figure has been low in recent months and this is a welcome
indication that reflects a growing confidence that the recovery is well
underway."
Encouraging signs
Earlier this week, a survey by the the Royal Institution of Chartered
Surveyors (Rics), some of whose members also work as estate agents, reported
that the number of people trying to sell their homes last month had reached
its highest level since May 2007.
With the bad weather now behind us buyers and sellers alike are returning
to the market with a renewed vigour
National Association of Estate Agents According to the NAEA's survey, the
average number of homes for sale at each of its member's branches rose from 56
in February to 60 in March.
At the same time, the number of house hunters registered with each branch
went up by 7% last month, to 274 per branch.
Sales have also risen, the NAEA said, from an average of 6.8 per branch in
February to eight last month.
The NAEA said all this was encouraging, especially with more sellers
around.
"This month's figures reveal an increase in the levels of housing
stock with more properties available for sale per branch - the highest value
recorded over the last six months," the NAEA said.
"More house-hunters also registered their interest. With the bad
weather now behind us buyers and sellers alike are returning to the market
with a renewed vigour," it added.
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