Archive for the 'Mortgages' Category

The Bank of England’s Monetary Policy Committee (MPC) has today voted to keep the base rate at 4.5%. The move (or lack of it) was widely expected by analysts.

However, it is generally expected that rates may rise before the end of 2006. Rising inflation has led people to believe the MPC will decide to increase the base rate in the coming months in order to keep inflation in check.

This has been reflected in rises in fixed rate mortgage deals already, with many rising by up to 0.5% in the last few months.

The Financial Services Authority (FSA) have been investigating exit fees on mortgages, or Mortgage Exit Administration Fees (“MEAFs”), since September 2005. It has been looking at whether the recent increase in the level of the fees charged by some lenders are fair to consumers.

The fee is labeled as covering costs such as changing name on the registration of the property at the Land Registry, but many think that lenders are increasing them disproportionately so they can recoup money ‘lost’ by offering extremely cheap mortgage deals to new customers.

Many mortgage contracts will state that the lender may increase the exit fee during the life of the mortgage, however, this means that the variation must comply with the Unfair Terms in Consumer Contracts Regulations 1999. The FSA has stated that “a variation clause is less likely to be regarded as unfair if the variation can only be made with a ‘valid reason’ which is specified in the contract.”.

With many lenders increasing their exit fees drastically in recent years, many may find it difficult to justify the increases as being ‘fair’. For example, Cheltenham & Gloucested charged just £50 5 years ago, but now charge £225 – an increase of 350%.

This issue is exacerbated by the fact that since 2003 the Land Registry has kept deeds in an electronic form, actually reducing costs for lenders.

The FSA has given lenders that are under investigation a month to produce a response, providing evidence of why increases to MEAFs were made. They will report on the issue in the autumn.

The Council of Mortgage Lenders (CML) has released results for April this year that show fixed rate deals accounting for 71% of all loans for house purchase and remortgaging – 17% more than April 2005. It says fixed rate deals are currently popular due to attractive deals offered by lenders, and consumer’s desire to lock in to long-term low rate deals.

The CML also showed that first-time buyers are now borrowed higher multiples of their salaries to get on the property ladder, with an average multiple of 3.21 – up from 3.15 in March. However, it also found that mortgage payments as a proportion of income had actually fallen from 17% in June 2005 to 16.2% now.

CML Director General Michael Coogan said: “Today’s data confirms that the market is in good shape. The strong take-up of fixed-rate deals is encouraging because they give consumers confidence in their mortgage payments and allow them to plan ahead financially.

“It is also interesting to see that while both first-time buyers and movers are borrowing a greater multiple of their income to get a mortgage, their payments as a proportion of income are lower than in the same period last year. This is potentially due to the higher take-up of attractive fixed-rate products over the past year.”

Figures released by the Bank of England today showed that lending on properties had reached £999.2 billion by the end of April 06. April showed an increase of £8.5 billion in mortgage lending; identical to the average over the past 6 months. The number of new mortgages approved in April totalled 106,000, down by 8,000 from March.

Since the total mortgage lending figure at the end of April was a mere £0.8 billion short of the trillion pound mark, then given the average increase for the past 6 months, it is likely that total mortgage lending rose to over £1 trillion early in May.

The Council of Mortgage Lenders (CML) sees the release as being indicative of the rise in people owning their own homes – rising from 60% to 70% of the population in the last 20 years. Talking about the £1 trillion mark, the CML’s Michael Coogan said, “Although it is a milestone, it will perhaps soon be forgotten as home-ownership and mortgage lending continue to grow further”.

The Council for Mortgage Lending (CML) has released results for April ‘06, saying that total lending for the month was £25.1 billion. This figure was 12% lower than March’s £28.4 billion, but this is likely to be due to the timing of Easter – in terms of average lending per working day, April’s figures were higher than March’s.

Michael Coogan, CML Director General, said:

“The record figures we have witnessed over the past six months illustrate that the market is in robust shape. Even so, the level of new mortgage approvals has stabilised in recent months, and we do not expect the underlying level of lending to rise from recent levels.

“In the past couple of months the interest rate picture has changed and financial markets are expecting the Bank of England to raise rates this summer. If this happens, housing and mortgage market activity is likely to slow down from the recent high levels as the year progresses.”