Housing & mortgage round up: An end to mortgage redemption penalties? Whilst house sales and mortgage lending both drop sharply


Housing & mortgage round upA wide range of stories this week, from the EU voting to ban mortgage redemption penalties, to more confirmation of the stagnant housing market.

EU to ban mortgage repayment penalties?

Members of the European Parliament have voted to ban early repayment penalties on most mortgage products. However it isn’t all good news for mortgage borrowers, despite the vote to ban redemption penalties it seems as though lenders will still be able to receive “fair compensation” for early repayment.

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Some mortgage experts have also suggested that the move could reduce choice in the mortgage market. At present some mortgage products are available without penalties whilst others clearly have a charge for redeeming early. It is generally the case that those products with penalties have a lower rate of interest and experts are concerned that these types of products could be withdrawn, reducing choice and increasing the interest rate for many mortgage customers.

The Economic and Monetary Affairs Committee also voted to ban the practice of making loans conditional on the purchase of insurance products.

Buy to let mortgages will be excluded from these two initiatives and it remains to be seen when the new rules will come into effect.

Mortgage lending drops in April

Mortgage lending dropped by 30% between April and March according to new figures from the Council of Mortgage Lenders (CML).

According to the CML 36,000 mortgages were advanced in April, with the fall being put down to the end of the government’s Stamp Duty amnesty for first time buyers. Loans to first time buyers fell by 48% in April with many experts predicting that they are unlikely to recover in the short term.

Paul Smee, Director General of the CML, said: “April’s figures show the expected effect of the end of the stamp duty concession on UK mortgage lending.”

He continued: “Given the economic uncertainty, any significant pick up in lending in the coming months seems unlikely.”

Mortgage and housing experts believe that the figures from the CML show just how fragile the UK housing sector is, reliant in many ways on government initiatives such as the Stamp Duty amnesty and the NewBuy mortgage scheme.

House sales plummet by 40% since 2007

Further evidence has emerged this week of just how far the housing market has fallen since the peak of the last housing boom in 2007.

A new survey by the Royal Institution of Chartered Surveyors (RICS), shows that in the three months to May 2012 15.6 completed sales were made per surveyor, a massive drop on the same period in 2007 at the height of the housing boom, when 25.4 sales were made.

RICS also found that houses were taking longer to sell, which is partly behind the fall in the number of properties sold. According to RICS, estate agents sold an average of 23% of all the properties on their books in the three months to May, down from 41% in 2007.

RICS Spokesman, Peter Bolton King, said: “Ongoing economic instability in the UK and overseas has continued to undermine consumer confidence, and the reluctance of many banks to offer affordable mortgage products has created something of a stagnant market.”

He continued: “In spite of this, a gradual stability is returning to the market and surveyors expect transaction levels to increase over the coming months, even if prices continue to dip across most parts of the country.”

Mortgage fees rise to record levels

Research by Moneyfacts this week has shown a 70% increase in mortgage arrangement fees over the past three years.

The news is a double whammy for some borrowers, who have also been hit by recent rises in the Standard Variable Rate (SVR) of many lenders.

The data shows that average fees payable to arrange a mortgage have risen from £878 to £1,511 over the past three years. Some mortgage products, generally those with the lowest interest rates, have significantly higher fees.

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

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