Mixed Messages From Mortgage Market

The latest Bank of England figures show that Banks and Building Societies cut lending by a net £2.425 billion between October and December, 2012.  This includes lenders who are taking part in the funding for lending scheme.  While I am noticing an increase in activity in mortgage lending, I know from speaking to a number of mortgage advisers that deals are taking longer to get through and that every box requires to be ticked before the lender will process the application – perhaps no bad thing!

Money Facts have recently called on lenders to re-open their books to first time buyers to get the property market moving.   Sylvia Waycot, editor at Money Facts, said “we have seen the first time buyer market stagnate as deposit demands become unrealistic.”  The latest significant changes the Government’s funding for lending scheme, which seems to put everything back on track – but only time will tell if this works out as planned.  We are already seeing the forward thinking lenders into the markets with innovative products to help first time buyers to get onto the housing ladder.  It looks as though we are about to enter yet another period of change within the mortgage market, and at last it might be for the better.

I hope the Government’s funding for lending scheme works as planned and the Chancellor takes the budget opportunity to do more to assist first time buyers.

Lindsay Darroch
Partner & Head of Property

 

Ray of light for property market

As readers of previous blogs will know, one of my main concerns is the lack of support for first time buyers in the property market.  This is primarily due to lenders tightening up their lending criteria and refusing to break the 90% loan to value rule.  I was pleased to hear from contacts in the USA that the housing market there is starting to show signs of recovery and the banks are now providing 95% and 97% mortgages.

I have been in discussions with a major High Street lender regarding a variety of mortgage products and I am delighted that due to those discussions we can now launch the Blackadders Deposit Match Scheme.  In practice, this means that if we are able to reach a deal on a property for at least 5% lower than the Home Report valuation the lender will class this as a 5% deposit requiring the purchaser to fund a minimum of a further 5% and thus treating the deal as a 95% mortgage.  This product is available for all purchasers although I do think it will be of particular interest to first time buyers. I think that this will start the release of the housing chain and will be a welcome development for purchasers and sellers.

This is a very exciting development and one that I believe will mark the beginning of an improvement in the housing market.   As I have mentioned before, to get a self sustainable property market we need to get the number of first time buyers over 40%, i.e. the number of first time buyers in the market needs to be more than 2 out of 5 of all purchases. This scheme will assist those who have small deposits or those who require to retain funds to pay for home improvements or contribute towards the purchase outlays such as stamp duty.

This is another exciting initiative that we are delighted to be part of and shows our commitment to getting the housing market moving.

I will report on the success of the Scheme in further blogs but in the meantime should anybody require further information then please do not hesitate to contact either myself or another of the Blackadders Property Team on 01382 342222.

Lindsay Darroch
Head of Property Services

The Government should create a first-time buyer guarantee fund with money raised from the Banks

Following my recent blog regarding breaking up the Banks, George Osborne has announced he will increase the Banks’ Tax – raising an extra £800m for the Exchequer. This makes good headlines and also appears to be a good political move in light of expected Bank announcements regarding bonuses. Taking more money away from the Banks, however, while trying to encourage them to increase lending appears to me to be two actions which are at odds with each other. At the moment the Banks are unsure of the housing market hence their reluctance to lend which is increasing the uncertainty and has the property market locked into a downward spiral. The only way to break this spiral is with Government intervention and I would urge the Chancellor to use the extra £800m he has raised from the Banks to create a first time buyer guarantee fund. This would help first time buyers back into the property market which would help stabilise the property market, increasing the Banks’ confidence and thus increasing the amount that they are prepared to lend by way of mortgage finance.

ps Since writing this blog the Scottish Government have announced their plans to help First time buyers. Whilst I welcome any initiative in this area I don’t think the proposals are enough to really help the market I will revisit the issue of First time buyers shortly

First time buyer assistance from builders firm

I heard with interest that Barratts have launched a First Time Buyer Scheme.  The scheme allows first time buyer’s parents to borrow 15% of the purchase price on an unsecured loan basis with a fixed rate of 5.4% and run for up to 12 years.  The scheme has no early repayment charges and a limited overpayment will be allowed penalty free.  This will enable first time buyers to have a mortgage of 80%, put down a 5% deposit with the remaining 15% funded by the parents through a loan from Hitachi.

As I have mentioned before, first time buyers have been badly hit in this economic downturn and the average age of a first time buyer is now 37.

I am in discussion with a national builder with development sites in Scotland to see if they would be in a position to offer something similar and I shall let you know as soon as I have some more information to report.

Lindsay Darroch
Head of Property Services

Are responsible lending restrictions going too far?

I welcome the comments by the Head of the National Association of Estate Agents voicing his concerns regarding the Mortgage Market Review (MMR).  Readers of this blog will know that for the past 18 months I have advocated strongly for Government action and support to force lenders to increase the amount of lending to enable all prospective purchasers and first time buyers in particular to get onto the housing market.  If the current proposed restrictions are applied, more than 150,000 purchases each year will not take place and this will hit first time buyers heavily.  This will have a huge knock on effect.  I will keep you updated in respect of these proposals.

Since writing this blog, Prime Minister, David Cameron has now spoken out against plans to clamp down even further on mortgages in the name of responsible lending.  Mr Cameron had indicated that lenders have already gone too far in preventing good risk buyers from accessing mortgages.

The Housing Minister Grant Shapps, who is due to meet the FSA during the course of this week in respect of the MMR proposals, has himself indicated that he would have failed to get a mortgage under the new proposals.

I am delighted that the Prime Minister and the Coalition Government are taking this matter so seriously as the housing market is fundamental to the whole economy.

I will keep you updated.

Lindsay Darroch
Head of Property Services
T: 01382 229222
E: lindsay.darroch@blackadders.co.uk

Bank mortgage approvals

I was concerned to hear that the number of mortgages for home buyers fell in August for the third month in a row. Demand for mortgages continues to be weak despite more properties coming on the market. Currently in Dundee and Angus there are 20% more properties coming on the market than there are sales. This is a concerning trend.

My view is that with the economic uncertainty and banks still showing an unwillingness to lend, there are a few more bumps on the road to economic and housing market recovery.

My watch word for this current time is uncertain and this re-enforces to me the importance of anyone contemplating getting involved in the property market taking the correct legal advice from solicitors with property experience.