Housing & Mortgage Round Up: Mortgage rates at lowest level for over two decades


Housing & mortgage round up_istockphotoA week without house price surveys, but we’ve still found plenty to report for those people who need their weekly fixed of housing and mortgage news.

This week we look at low mortgage rates, a new entrant to the mortgage market and calls for the government to do more to address the shortfall in affordable housing.

Mortgage rates at lowest level for two decades

New data from Moneyfacts has shown that mortgage interest rates are now at their lowest levels for 24 years.

The Funding for Lending Scheme (FLS), introduced by the government in August last year, has given banks and building societies a ready source of cheap finance, allowing them to push rates lower for many mortgage borrowers.

According to Moneyfacts two, three and five year fixed rates are now at their lowest levels since 1989, when fixed rate mortgage deals were first introduced.

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Furthermore, deals which require a relatively low deposit of 10%, are also becoming cheaper. This will please first time buyers, who until recently have not benefited as significantly from the Funding for Lending Scheme.

Syliva Walcott of Moneyfacts said: “Recent criticism levied at banks was that they were offering the best mortgage deals in the less risky 60% LTV tier. It is good news on that front, as some very attractive higher LTV loans are at last entering the market.”

However, Walcott cautioned that mortgage lending criteria is still relatively strict: “You will still need to have a clean credit record, income sufficient to not only pay today’s mortgage rate but also potential future increases, and of course the stickler for most, the deposit.”

Mortgage lending drops in January

Despite the low mortgage interest rates and rising optimism in the housing market, the Council of Mortgage Lenders (CML) has announced that mortgage lending fell in January, compared to December 2012 and also the same time last year.

According to the CML £10.4 billion was lent in new mortgages during January, a fall of 9% on December and down 3% on the same time last year.

Despite the amount of money being lent falling to the lowest level since April 2012, the CML believes the outlook for 2013 is still positive. Caroline Purdey, Market and Data Analyst at the CML said: “Housing sentiment remains positive, despite on-going economic pressures. A worsening in the outlook for inflation presents a greater headwind, but we still expect the Funding For Lending scheme to lift activity over coming months.”

Purdey continues: “House purchase activity was robust into the start of 2013, on the back of better mortgage availability and pricing, and we share the Bank of England’s confidence that this will continue over the coming months.”
In light of the ultra-cheap mortgage deals currently available some mortgage experts have expressed surprise that lending fell in January, although it would be wrong to read too much into the figures from a single month and time will tell whether the fall over the past month will be the start of a longer term trend.

New mortgage lender launched

A rare event indeed this week as a new mortgage lender was launched.

Investec, a specialist bank and investment manager, has launched Investec Professional Mortgages, offering residential and buy to let mortgages to professionals.

Investec Professional Mortgages will only be accessible through mortgage brokers and applicants need to be professionals, such as accountants, executives or senior managers and have a minimum income of £50,000 for a residential mortgage and £75,000 for a buy to let loan.

Alex Hammond, Investec Specialist Bank spokesman said: “Increasingly, those who would normally be regarded as well paid are struggling to secure the loans necessary to purchase property because of the uncommon nature of their income.

Hammond continued: “We have created this new range of mortgages to meet the specific requirements of professionals, who are often individuals with limited time to arrange a mortgage. We look for good reasons to lend to the right customers and ensure that professionals receive the level of service they expect.

“This market sector isn’t driven by rates alone and individuals demand better service than they are currently getting. We think this is an area where we can make a difference.”

More action needed on affordable housing

The need to build more affordable housing has never been far from the headlines over the past few years, but this week saw renewed calls from two organisations for the government to do more.

The calls come after evidence emerged that the number of new homes being built is falling. Figures from the Department for Communities and Local Government (DCLG) show that despite recovering from the slump at the height of the financial crisis, and a small, 1% rise in the three months to December, the number of new homes being started has dropped over the past few months, causing concern that many people will be unable to find affordable housing.

Speaking for the housing charity Shelter, Campbell Robb said: “Unless action is taken now, it’s hard to see our housing crisis improving any time soon.”

Echoing the comments from Shelter, David Orr, Chief Executive of the National Housing Federation (NHF), said: “Despite the current tough economic environment, the small signs of increased house building are encouraging, but more needs to be done across the whole sector to meet the huge need for more affordable homes.”

“We expect housing associations, who are dealing with a radically new investment framework and a huge cut in funding for affordable housing, to continue finding innovative new ways to meet that demand.”

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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