This week’s housing round up includes news that the housing market remains stagnent, whilst lenders are pushing up mortgage arrangement fees and in some cases interest rates.
Mortgage fees rise by £600
House buyers with the largest deposits are perhaps surprisingly the group hardest hit by a rise in mortgage fees.
Research by Moneyfacts has found that the average mortgage fee has risen from £889 a year ago to £1,498; an increase of over £600.
The rises have not been distributed evenly, for example the average mortgage arrangement fee for a 60% loan to value mortgage has risen by 42% whilst loans in the 90% to 95% bracket have seen fees rise by only 11%.
It is clear that as interest rates stay low and mortgage volumes subdued, lenders are looking at other ways to maintain profits.
Mortgage experts warn that the arrangement fee can often be overlooked by borrowers focusing on getting a loan with the lowest rate of interest possible. Borrowers should factor in the arrangement fee, plus any other charges, into their calculations, to ensure that the loan with the lowest interest rate is actually the best deal over the longer term.
Slight rise in mortgage approvals
The British Bankers Association (BBA) has published figures which show approvals for mortgages have reached a 19 month high.
36,171 mortgages were approved for house purchases in December, up from 34,809 in November but still low compared to the height of the housing boom.
Mortgage approvals are seen as a bellwether for the housing market, a significant rise in approvals would signal a recovery, however the number of mortgages approved for house purchases has hovered between 30,000 and 35,000 for the past three years with little sign of a significant breakthrough.
Howard Archer, chief UK economist at IHS Global Insight, said: “Mortgage approvals remain persistently low compared to long-term norms. At 36,171 in December, mortgage approvals were only 64pc of the average monthly level of 56,544 seen since 1997.”
The number of remortgages approved fell very slightly from 21,788 in November to 21,164 in December.
UK mortgage market “difficult to call”
The Council of Mortgage Lenders (CML) have said that the state of the UK mortgage market in 2012 is “difficult to call”, with the effects of the Eurozone crisis still being felt.
The latest figures from the CML showed that gross mortgage lending reached £11.7 billion in December 2011, up 12% from the same time last year but down 12% on the preceding month.
The figures draw a line a year when the mortgage market remained stagnant, with total lending at £140 billion up by just 3% on 2010. This is of course partly due to the difficulty first time buyers, often with small deposits, are facing in obtaining finance.
However, a glimmer of hope was provided by lending figures for the last quarter which were up 11% on the same period in 2010.
Bob Pannell, chief economist at the CML, said: “The closing months of 2011 saw stronger mortgage lending activity and housing transactions, despite the fact that short-term economic prospects are challenging.”
Pannell continued: “There is a glimmer of light ahead for households in that real incomes could stabilise and perhaps even start rising by the end of the year.”
“But, continuing eurozone problems mean that mortgage funding prospects are uncertain, so overall UK mortgage market conditions for the year ahead remain difficult to call.”
Volatile mortgage rates ahead
Mortgage experts and brokers have warned that 2012 could be a volatile year for mortgage interest rates.
A number of lenders have increased their mortgage interest rates over the past few days, some by as much as 0.3%. The increases are largely due to continued economic uncertainty, the costs of wholesale funding, which is how many lenders raise money and nervousness around the housing market,
Other lenders have kept rates the same but have changed loan to value bands so the interest rate for the same size of deposit is effectively increased.
Mortgage lenders often follow each other’s moves, acting like a herd; lenders do not want to be caught out offering substantially cheaper mortgage deals than their rivals and then getting inundated with applications.
Mortgage experts have warned that with rates volatile, and currently rising, it has never been more important to shop around for the best deal, comparing fees, which can often mount up, as well as interest rates.
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