Housing & mortgage round up: Lloyds TSB to help 60,000 first time buyers, whilst housing market improves


Lloyds TSB to help 60,000 first time buyersNo house prices surveys this week but still plenty of news to report.

This week saw a huge boost for first-time buyers as a major lender shows their commitment to this beleaguered group of would-be homeowners.

Elsewhere there was good news for those people looking for signs that the housing market might finally be coming out of the doldrums.

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Boost for first-time buyers

This week saw more good news for first time buyers with an announcement from Lloyds TSB that it is setting aside £6.5 billion to lend to 60,000 first time buyers in 2013.

Announcing the move, Lloyds TSB, which includes brands such as Halifax, Birmingham Midshires and Bank of Scotland, said this was the largest amount ever set aside by a UK bank specifically to help first time buyers.

This is not the first time the bank has made such a pledge, in 2012 it said it would be setting aside £5 billion to lend to 50,000 first time buyers; by September it has helped 40,000 buy their first home.

The bank is also the largest supporter of the government’s NewBuy scheme, with the Halifax accounting for 40% of the scheme’s funding. Whilst first-time buyers can take advantage of other higher loan to value mortgage products from the group, as well as other schemes, which allow parents to help their children get onto the housing ladder.

The announcement from Lloyds TSB comes as the race to help first-time buyers hots up. HSBC has previously announced that it lent £4 billion to first time buyers in 2012, the Nationwide has claimed it was responsible for almost 20% of all lending to first-time buyers, whilst Barclays has recently launched a new mortgage product aimed at helping this group.

Is the Funding for Lending Scheme starting to work?

Evidence seems to have emerged that the Funding for Lending Scheme is starting to have a positive effect on the housing market.

The Funding for Lending Scheme was launched by the Treasury and the Bank of England to provide a cheaper source of finance to banks and building societies, which would be then lent on to mortgage borrowers. The idea is to make mortgages more affordable and to try and open up finance to potential borrowers who had previously struggled to get a mortgage.

Many people have criticised the scheme for a slow start and the fact it only seemed to be helping out people who were already able to get a mortgage, however it now appears that things may be improving.

In a sign that lending is becoming cheaper the Bank of England has said that fixed rate mortgages for house purchase had dropped by 0.3% during the fourth quarter of 2012.

The Council of Mortgage Lenders (CML) also revealed that gross mortgage lending finished at £143 billion for 2012, similar to 2011, but with increased activity in the final quarter of the year, possibly due to the Funding for Lending Scheme. The CML expects this trend to continue into 2013, with gross mortgage lending predicted to rise to £156 billion, a sign that confidence could be returning to the housing market, along with an increase in the availability of finance.

House prices set to rise to pre-credit crunch levels

House prices are on the rise, if a leading forecaster is correct. The Centre for Economics and Business Research (CEBR) has predicted that house prices will rise by 0.8% in 2013, taking the value of the average home to £219,000. The CEBR also believes that house prices will rise back to their pre credit crunch levels in 2014.

Daniel Solomon, Economist with the CEBR, said: “Next year UK property prices will hit a significant milestone, passing their pre-crisis peak for the first time.”

The predictions are more bullish than those of most housing experts, who expect prices to remain broadly static in 2013 or perhaps even fall slightly. However, homeowners who bought at the peak of the last housing boom, especially those who put down a small deposit and may therefore be affected by negative equity, will certainly be hoping that the predictions come true.

Looking further ahead the CEBR predict that in five years’ time the average home will be worth £261,000; almost 20% higher than current levels. The CEBR believe the growth in house prices will be driven by a stronger economy, but with economic data patchy at best, and the UK struggling to pull itself from the grip of a severe recession, many people will question whether these predictions will come true.

However, one highly repsected group has echoed the CEBR predictions. The Ernst & Young Item Club has predicted a rise in house prices of 0.2% in 2013 and 2.1% in 2014, followed by a larger rise of 5% in 2015, with the rises again being driven by a more a favourable economic and employment outlook.

Mortgage lending expected to rise in 2013

New figures from the Council of Mortgage Lenders (CML) show that mortgage lending is expected to rise in 2013, on the back of lower interest rates and cheaper loans.

As we’ve already mentioned, the CML has predicted that mortgage lending will rise from £143 billion in 2012 to £156 billion in 2013, an increase of 9%.

The rise will be driven, in most part, by the government’s Funding for Lending Scheme, which is making cheaper wholesale finance available to banks and building societies, allowing them to reduce mortgage rates. In fact, the Halifax, the UK’s largest mortgage lender, has said that mortgages are now twice as cheap as they were during the credit crunch.

Commenting on the figures, Bob Pannell, Chief Economist at the CML said, “We are more positive about the UK housing market and wider economy than a year ago, despite economic headwinds and downside risks.”

Pannell continued: “A key reason is that lenders currently face few funding pressures, in part reflecting the funding for lending scheme.

“House purchase activity was robust in the fourth quarter, on the back of better mortgage availability and pricing, and we expect this to continue over the coming months.”

The CML’s prediction is likely to be regarded as bold by some mortgage experts, many of whom have been critical that the scheme has simply reduced interest rates for those people who could already get a mortgage, whilst making it no easier for would-be borrowers who have previously struggled to obtain a loan. Although, evidence now seems to be emerging that the scheme is having a positive effect on the housing market.

Savers have also been hit by the Funding for Lending Scheme, as banks and building societies have slashed their best savings interest rates  as a result of the cheap money available from the scheme.

Homeowners rush to sell

With spring around the corner and perhaps also spurred on by the extremely low mortgage rates currently being seen, homeowners are rushing to put their property on the market.

The estate agent, Right Move, has revealed that the number of properties being put on the market has increased by 22% to around 11,000 per week.

However, Director of Right Move, Miles Shipside, suggested that another reason could be behind the increase: “After five years of putting their lives on hold with their spare space shrinking around them, it looks like some of the pent-up demand to move is breaking out.”

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

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