UK lenders are continuing to woo buyers with introducing a rash of new rates and deals at a time when figures suggest that lending is increasing.
The latest data from the Council of Mortgage lenders estimates that gross mortgage lending in July increased to £12.7 billion, an 8% increase on the previous month.
But CML market and data analyst Caroline Purdey admitted that the market is undergoing a see-saw pattern against a broadly flat market.
‘Interpretation of recent trends continues to be challenged by one off effects. We look forward to the September figures when the distorting effects of the Diamond Jubilee and the Olympics should largely have worked their way through,’ she said.
According to David Newnes, director of LSL Property Services, owners of Your Move and Reeds Rains, it is very encouraging that lending picked up during July despite the recession and the Eurozone crisis haunting financial markets and undermining lender confidence.
But he reckons that the increase has more to do with a subdued June than a sudden improvement on the ground for new borrowers.
‘In reality, it’s not an easy time for first time buyers, who still face significant barriers when it comes to securing mortgage finance, and hefty deposit requirements remain too big an ask for the vast majority of potential buyers,’ he said.
‘Pressure is mounting on the Funding for Lending scheme to boost activity in the lower tiers of the market, but there is no guarantee that lending will be diverted to those without substantial equity. Lending needs to focus on helping meet the needs of those lower down in the housing market if serious change is to emerge,’ he added.
There is little sign of a recovery in the lending market according to David Whittaker, managing director of Mortgages for Business. However, he pointed out that buy to let lending has been relatively healthy with seven straight months of growth.
‘But buy to let is only one of the pillars which supports a healthy lending market and cannot carry the weight of the sector in isolation. Until we see significant improvement in the strength of the other elements of the lending market we’ll continue to see the rugby ball bounce we’ve grown so accustomed to over the last few years,’ he explained.
David Brown, commercial director of LSL Property Services, said it is still tough for first time buyers to get their foot on the property ladder despite the historically low mortgage rates available.
‘Cash buyers and the equity rich remain the engine room of the housing market at present, and this won’t change until lenders feel confident enough in the economy and the eurozone to begin to lend more heavily to those they perceive as higher risk,’ he added.
Lenders are trying to encourage buyers. Among the latest new deals Barclays has lowered some of its popular mortgage rates by up to 0.30% and introduced a five year fixed rate at 4.89% for those with a smaller 15% deposit or equity.
The key reductions are a drop of 0.30 percentage points on the Future Fix mortgage for borrowers with a 30% deposit or equity. The bank said that this gives borrowers the best of both worlds, as it offers a really good compromise of a tracker whilst rates are low now and a three year fixed rate starting in two years at today’s low prices. The tracker element is reducing to base plus 2.49% for two years, the three year fixed rate remains at 3.99% following the cut two weeks ago and this comes with a £999 application fee.
Alongside this, the two year fixed rate mortgage for borrowers with a 40% deposit is reducing from 3.09% to 2.89%. This rate comes with the standard £999 application fee and £499 for customers who qualify for a Barclays loyalty mortgage.
‘This is the second time in less than a month that we have made cuts to our mortgages and is due to a highly competitive market with lenders making several reductions in the last few weeks. This is great news for borrowers who are getting access to some really low rates. We would encourage people to act now and review their mortgage to see if they stand to save money by remortgaging,’ said Andy Gray, head of mortgages at Barclays.
‘For those with smaller deposits who need the security of fixing our new five year deal gives consumers purchasing a house or existing borrowers who need to remortgage a great deal. A borrower with a mortgage of £150,000, would pay £867 a month. For those with larger deposits, but who are uncertain what to do with the recent speculation over the future direction of base rates, Future Fix could be just the product for them. This provides the flexibility and low cost of tracking base rate now with the certainty of a fixed rate in the future,’ he added.
The Leeds Building Society has launched a shared ownership mortgage available up to 95% of borrower share to help first time buyers onto the housing ladder, at a competitive rate of 5.99% for three years.
‘We are all well aware of the difficulties facing first time buyers buying a home. They can often struggle to meet the full asking price or their current income is insufficient to support a full mortgage. This shared ownership product facilitates that first step, and provides a starting point to staircase up to full home ownership as earning potential increases,’ said Kim Rebecchi, Leeds Building Society’s sales and marketing director.
‘Our new three year product at 5.99% has an overall maximum LTV of 75% with a maximum borrower share of 95%. It’s ideal for customers who have saved for a deposit but cannot buy a property in their own right. There is no doubt that this product will prove attractive to those customers who are ready to make the first step,’ she added.
It comes in at 5.99% fixed up to and including 30 November 2015, has no higher lending charge, free standard valuation up to £335, free in-house legal services for standard re-mortgages, no completion fee, a £199 booking fee and has tapered early repayment charges of 4% of the amount redeemed in year one, 3% in year two and 2% in year three.
The Leeds has also reduced the rate on its two year fixed rate mortgage by 0.20% to 2.95% available up to 75% LTV.
‘This is a fantastic opportunity for those borrowers who wish to lock into the certainty of low fixed repayments. This product delivers customers with the peace of mind and security that their monthly payments will remain the same for two years. This is combined with the flexibility of 10% capital repayments each year at a very affordable rate,’ said Rebecchi.
She added that the lender has a range of market leading ‘fee assisted’ that are ‘ideal’ for re-mortgages, offering free standard valuations and free in-house legal services for standard re-mortgages, together with reduced fees.