Mortgage approvals on the rise

The number of mortgage deals is increasing at last, as lenders have lowered the requirements and have given the opportunity to first-time buyers to be approved for deals, according to website mortgagerates.org.uk. This will hopefully lead to higher loan to value deals in the months to come.

In June 2011, when the market reached a 13-month peak, 48,421 deals were approved, which marks a 4% increase compared to May 2011, when the number was 46,418. However, experts warn that the trend is for mortgage approvals to remain low in the near future. Nationwide, the real estate market shows little improvement and remains relatively stable, with prices going up by mere 0.2%, an average of GBP168,731.

Re-mortgage deals are also on the rise by 5% despite the danger of rising interest rates and add up to 30, 755 in June. Signs that people are paying off mortgage debt faster are evident, too. Net mortgage repayment reached GBP100m in June, while net mortgage lending went down by GBP69m in May 2011, the Bank of England reported.

Meanwhile, Gatehouse Bank’s head of real estate Adam Cavanagh expects the ongoing demand for property in London to revive the UK property market in general, as the capital city remains first choice for business property. In a column for Gulf News, Cavanagh explained that investors regard the UK housing market as steadfast due to the expected returns of 7% to 10% for the year.

Sellers trim asking prices for two in five houses

Two out of five UK houses currently up for sale, or 38.6% of the total, have undergone a downward revision in their asking prices at least one time since their arrival on the market, making it the highest number recorded over the past year, Zoopla.co.uk reports.

This compares with 37% three months ago and is significantly above the 32% registered a year ago. Even the most resilient market segment, that for properties valued at over GBP1m (USD1.6m/EUR1.1m), has not proved immune. Sellers have trimmed at least once the asking prices for 27% of the luxury abodes on sale compared to 25% three months ago and 22% a year ago.

According to the property website, vendors have lowered prices by an average of GBP18,597 as they seek to lure buyers. This makes for an average price cut of 7.13% against 6.1% a year ago and means that the current discount exceeds last year’s by GBP2,200.

The tendency for the south to outperform the north continues unabated and, not surprisingly, London remains a market apart. It has the smallest number of properties whose prices have been trimmed, their proportion of the total standing at 32.4%.

Commenting on the findings, Zoopla’s business development director Nicholas Leeming said that feeble demand is forcing sellers to rein in their pricing ambitions. Still, many aspiring home buyers cannot take advantage of the situation as antsy mortgage lenders continue to keep a tight grip on their purse strings. Meanwhile, some prospective buyers are unwilling to take a chance given the uncertain economic outlook, Leeming stated.

House prices in July sink to 19-month low

July house prices in England and Wales slipped 0.1% between months and were 2.6% lower compared to last July, meaning that the average value was the lowest registered since December 2009, says the latest edition of the LSL/Acadametrics House Price Index.

It was the fourth consecutive month of decline, bringing average prices down to GBP217,300 (USD 353,723/ EUR 248,330). However, this still remains above the value recorded in April 2009, when the recession was in full swing and the average house price stood at GBP200,234. While the latest drop has eradicated the modest progress made in 2010 and the early part of 2011, the figures also indicate that the year-on-year decline rate is slowing down. The 2.6% drop follows a second-quarter slide of 3%.

The only region where house prices have grown consistently since 2007 is Greater London with an increase of 5.6%. But accounting for inflation, even the capital has not been spared, suffering a 7.5% fall. Country-wide, the drop in real terms over the past four years amounts to slightly above 17%.

According to David Brown, LSL Property Services commercial director, the new numbers demonstrate that the housing market is not taking a sharp dive over the short term but retaining its longer-term weakness. During the second quarter, property transactions fell in number by 5.9% on the year, mostly due to the tough lending criteria still kept in place by jittery mortgage providers. With all the uncertainty surrounding Britain’s economic prospects and the fuzzy outlook for the global economy, lenders are unwilling to approve high loan-to-value loans, excluding most first-time buyers from the market, Brown commented.

CML reports strong Q2 growth in buy-to-let lending

The second quarter of 2011 witnessed a substantial increase in both the volume and value of buy-to-let mortgages extended by UK lenders and the results were the best recorded since the final quarter of 2008, new figures from the Council of Mortgage Lenders (CML) revealed.

In gross terms, lending volume jumped by 29% on the year, while the value shot up by 40%.

According to the CML report, banks advanced 32,000 buy-to-let mortgages in the second quarter, which translated into GBP3.5bn (USD5.67bn/EUR3.99bn) worth of loans. Compared to the preceding quarter, lending volume grew by 16% and the value went up by 21%.

The primary reason for this significant growth was the high level of remortgaging activity, which was responsible for 65% of the total increase registered during the quarter. Lenders approved 15,320 remortgage loans, whose combined value amounted to GBP1.6bn. This represents volume growth of 20% and value increase of 27% in comparison to the first quarter. In the case of gross buy-to-let lending, remortgaging had a 53% share of the total against 51% in the prior quarter.

The CML also estimated that buy-to-let repossessions advanced by 9% between quarters. In the second quarter, repossessed buy-to-let properties numbered 1,900 versus 1,700 in the preceding three months. But arrears levels for buy-to-let mortgages dipped slightly in the second quarter, marking the first time in three years that they had fallen below levels recorded in the owner-occupied sector. There were 28,100 buy-to-let loans with payments more than three months overdue, which represents 2.09% of the overall number and is 0.05% lower than the corresponding rate for the owner-occupied sector.

UK landlord spirits keep rising, Paragon Q2 report shows

Optimism among UK landlords remains on the rise and looks likely to grow stronger in the quarters ahead judging by the figures in Paragon’s Q2 Private Rented Sector Trends Report.

The buy-to-let mortgage specialist found that 23% of landlords felt more upbeat during the second quarter about the outlook for their portfolios and rental income. Professional landlords were revealed as particularly optimistic, with 30% of them declaring they were in higher spirits. The proportion of smaller-scale landlords describing themselves as more bullish was 15%.

The improving mood is also apparent in expectations about portfolio sizes. In their first positive prediction in two years, landlords expect their portfolios to contain an average of 13.1 residential properties a year from now compared to the current 12.6.

There is little to complain about in the rental income department, Paragon also found. Three in ten, or 29% of landlords, lifted their rental income in the second quarter and most of them achieved growth of between 2% and 4%.

In the matter of portfolio net value, 74% do not expect any change during the current quarter. However, there was greater optimism on that score as well in the second quarter. During the first quarter, 19% had predicted a drop in the net value of their portfolios but the share of pessimists fell to 12% in the second quarter. Meanwhile, the proportion of those forecasting a rise edged up from 13% to 14%.

Interestingly, terraced houses have emerged as the most popular type of property among landlords planning to expand their portfolios in the current quarter and over 50% expect to invest in such properties.

Landlords beyond London catch buy-to-let investment bug

While London landlords remain the most active investors in new rental property, the buy-to-let boom is no longer confined to the UK capital and property portfolios are larger in some other parts of the country, a joint study by the Association of Residential Letting Agents (ARLA) and the Residential Landlords’ Association has established.

With a score of 30%, the North East was revealed as the region where the biggest number of landlords had bought property during the past 12 months. The Midlands and the Rest of London (the area within the M25 ex-Central London) stood side by side with 26%. But only 18% of South West landlords acquired new property and about 10% of them sold assets, making it the biggest number for the country.

Landlords operating in Central London and the Rest of London emerged as the most likely to add new properties to their portfolios in the coming 12 months, achieving respective scores of 33% and 30%. However, Midlands landlords were revealed as equally keen, with 30% of them saying there is such likelihood.

The study also found that portfolios in the North are bigger. The North East and North West have 13 properties on average per landlord compared to six for Central London and the South East.

Ian Potter, ARLA’s operations manager, noted that landlords outside London are apparently moving to snatch opportunities while property prices are low. Some UK towns are an attractive investment proposition being the seats of higher educational establishments. Others are expected to benefit in the future through government initiatives such as the Local Enterprise Zones programme.

Negative equity befalls 827,000 UK mortgage holders in Q1, CML finds

This year’s first quarter found about 827,000 UK households saddled with mortgages bigger than the value of their homes, referred to in professional jargon as being in negative equity.

The figure comes to light courtesy of new research by the Council of Mortgage Lenders (CML), which last undertook a similar study in April 2009.

The results mean that 7% of mortgage borrowers would be left owing money if they decided to sell their houses at this point. During the 2009 research, conducted just after some of the sharpest drops in house prices, the CML estimated the number of borrowers in negative equity as 900,000. It noted that the new figure pales in comparison to the early 1990s, when the number climbed as high as 1.6m.

The majority of UK homeowners have a plump equity cushion since the average ratio of loan to value is below 60%. This indicates that borrowers in that group will be protected in case of further market decline. Still, almost 20% of borrowers are facing the negative equity risk as they have less than 10% of equity.

Paul Smee, CML director-general, pointed out that being in negative equity has no direct bearing on a borrower’s ability to service his or her mortgage debt. The problem is that homeowners cannot afford to move house if they want or need to, for example when personal circumstances change. Although the situation is considerably better than in the 1990s, negative equity has been a contributing factor in the housing market stagnation over the past few years, Smee noted.