Housing & mortgage round up: Mortgage lending falls, whilst lenders call for ban on Interest Only mortgage


Housing & mortgage round upMortgage approvals fell significantly last month whilst some lenders call for a ban on Interest Only mortgages. At the same time there are signs of life in the government’s NewBuy mortgage scheme.

Mortgage lending falls 19% in April

Latest figures show that £10 billion was lent to mortgage borrowers in April, higher than the same time last year but down 19% on March.

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The rush to beat the end of the government’s Stamp Duty holiday for first time buyers may explain the subdued lending figure, however it is also clear that lenders, such as Santander, are looking to lend in smaller volumes and tightening lending criteria.

Reacting to the figures Bob Pannell, Chief Economist at the CML, said: “Mortgage lending activity has been relatively buoyant in recent months, with stronger lending for house purchase underpinning the more upbeat lending picture.”

Pannell continued: “The underlying picture is likely to be a bit stronger than the April figure suggests, because some first-time buyers are likely to have brought forward their transactions to March to take advantage of the stamp duty concession that was coming to an end.

Pannell also revealed fears for the UK mortgage and housing market if the crisis in the Eurozone deepens: “Eurozone developments are highly uncertain and have the potential to undermine UK economic prospects and conditions in our housing and mortgage markets. The underlying picture is likely to be one of easing momentum in the housing market, but with potential for a sharper downwards correction on bad eurozone news.”

Lenders ask FSA to ban Interest Only mortgages

A number of mortgage lenders have asked the FSA (Financial Services Authority) to ban Interest Only mortgages.

At the recent Mortgage Expo, Lynda Blackwell, Manager of Mortgage Policy at the FSA said: “Some lenders have asked us to ban Interest Only. We have listened to all the different views and what we accept is that Interest Only is right for certain borrowers.”

To try and avoid a repeat of previous mistakes many lenders have tightened up their lending criteria with some lenders refusing to offer Interest Only mortgages, whilst others have significantly reduced the loan to value that they will allow on Interest Only deals. However, it appears that some lenders have gone further asking for an outright ban.

The FSA’s stance that Interest Only mortgages are right for some will come as a relief to those people who want this type of arrangement. Mortgage experts point out that if Interest Only mortgages were banned those people for whom it is appropriate, perhaps because of high bonuses which will allow them to repay lump sums, or because they have investments to repay the mortgage, would potentially be disadvantages if they have to take out a Capital Repayment mortgage.

NewBuy mortgage scheme shows signs of life

After last week’s concerns over the NewBuy mortgage scheme there is some positive news to report.

Figures from the Home Builder’s Federation show that since it was introduced 400 homes have been reserved under the NewBuy scheme.

The NewBuy scheme allows buyers of new build properties to buy a property, subject to approval by the mortgage lender, with just a 5% deposit with the government and home builders guaranteeing part of the mortgage.

The scheme has however run into problems, with accusations that lenders are charging high interest rates and that mortgage lending criteria is too tight.

However it does seems that despite these problems some borrowers are being accepted by the banks who are part of the scheme; Halifax, Santander, Natwest, Nationwide and Barclays.

Responding to the figures, Executive Chairman of the Home Builder’s Federation,  Stewart Baseley said: “These figures make us very confident that the scheme will deliver tens of thousands of sales over the coming years.

“As today’s house building statistics show, we have an acute housing delivery problem. By enabling home buyers to purchase a new home, NewBuy will kick-start new home construction, creating economic growth and thousands of jobs across the country.”

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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