Add comment March 12th, 2009
Breaking news just out is that the number of mortgage loans issued to people buying a new home in the UK has slumped to a new record low.
Just 23,400 loans were taken out in January – that’s 28% down on December, according to the Council of Mortgage Lenders.
Year-on-year the figure was down 51%. Activity in the housing market is all but drying up.
1 comment February 24th, 2009
We have been all too aware of the dearth of sensible mortgage schemes available for buyers of Cyprus Property in recent months. The schemes on offer in recent months have seen interest rates around 8% with no sight of a payment holiday for off plan purchases and Loan to Values being limited to no more than 70%.
There have been many false dawns but we note with interest a scheme that has just been announced by the Bank of Cyprus. It offers an 80% Loan to Value and provides a two year payment holiday for off-plan purchases. The interest rate is also capped at 5% for the first three years. Now this scheme is only available for Cypriot residents but I would take this as a sign that things are slowly returning to normal and we would expect similar schemes to be rolled out to non residents in the coming months as more banks reenter the market.
Add comment February 13th, 2009
It was announced today that the number of mortgages taken out by house hunters fell to its lowest level since 1974 during 2008. The Council of Mortgage Lenders numbers show that just 516,000 mortgages were taken out for house purchase last year which is a fall of 49% compared to 2007.
Net lending, which strips out redemptions and repayments, for all types of mortgage also dived sharply, dropping to £39.7bn in 2008, from £108.2bn a year earlier. There was also steep fall in the number of first-time buyers getting on to the ladder. Just 194,200 people bought their first home in 2008, 46% fewer than in 2007. That slump in first time purchases continued in December, with just 12,100 people taking out loans collectively worth £1.4bn – the lowest levels since the CML’s monthly records began in 2002.
So those are the hard numbers but what does it mean, as I guess the headline is not that much of a surprise to many! The reality is that the shortage of mortgage funding and reduction in the number of active lenders has reshaped the mortgage landscape in the space of a year. I don’t expect many of the currently hibernating lenders returning to the market any time soon if at all!
So we are in a position where the few lenders that remain can pick and choose what business they want to write and close their books as soon as they achieve relatively modest targets. I suspect that overall 2009 will start painfully slowly and then things will pick up at the tail end of the year, leading to a further overall contraction in the market.
Add comment February 6th, 2009
Well the Halifax stats that were released yesterday certainly made me sit up and take note. House prices ROSE, yes ROSE by 1.9% during January, and brings an end to 10 consecutive months of price falls. But should we believe them?
I’d like to. My house, like many I guess, has spent the last 6 months in freefall. Luckily I don’t have to sell it and hope that in a few months time it will pick back up again. But realistically it may not happen for years. I see little sales movement in Greater London and the majority of people that I speak to think that whilst prices may not have that much further to fall that they will not be heading upwards any time soon.
However, the number of optimists is starting to grow. However, as noted in my previous post, figures from the Bank of England show mortgage lending rose in December from the previous month. Last month the Woolwich launched its cheapest ever mortgage.
Also the Royal Institution of Chartered Surveyors says it’s seen a jump in new buyer inquiries. It also reports anecdotal evidence suggesting that recent interest rate cuts, combined with house-price falls, are beginning to tempt first-time buyers back into the market.
We seem to be entering a period of “data confusion” with different data giving conflicting messages, perhaps an early sign that we are nearing the bottom certainly with regard to the housing market.
Add comment January 30th, 2009
These lending figures come as a surprise in a week of gloomy economic data.
Net lending, which strips out redemptions and repayments, doubled to £1.9bn during the month – the biggest rise since July 2008. The number of mortgages approved for house purchase also increased after hitting a new record low in November. Approvals were at 31,000, up from 27,000 during the previous month.
Sterling immediately leapt at the news, pushing the euro below 90 pence for the first time in eleven days.
The increase is all the more surprising as activity we would normally expect activity to tail off if December in the run up to Christmas. However, lending is still considerably down on the previous year, with December’s figure only a quarter of the level seen 12 months earlier.
While the data may be a sign that banks are gradually becoming more prepared to lend, mortgage lending levels are still very weak. We await mortgage data for the coming months with interest.
Add comment January 8th, 2009
The Bank of England has cut rates again, this time by 0.5% to 1.5%. These are truly historic times with this being the first time that rates have fallen below 2% since the Bank of England was founded in 1694. Is it enough? My guess is probably not, and I would expect the market to react as such.
However, I think that it is a sensible step for now and that there will now be pause for the economy to catch its breath after the substantial cuts we have seen since the cuts started in October and wait to see what effect these cuts are having. Any more moves and the Bank of England will have effectively have used all of its interest rate bullets. The only option then left would be quantitative easing (printing more money!) which really would be akin to reloading the gun for one last shot.
Add comment December 12th, 2008
Over the last couple of months we have seen the Bank of England cut UK base rates from 5% to 2%. So this is a cut of some 60% in borrowing costs. There is talk that we will see further cuts in the next couple of months as the central bank tries to stimulate a clearly suffering economy.
Obviously those on existing tracker rates (whether residential or BTL) are benefiting but what is the position for new borrowers? A couple of months ago a major UK lender was offering prospective customers with a 25% deposit a mortgage rate of 4.79% as a two year base rate tracker and 5.04% for a two year fixed rate. Now the same lender has withdrawn all of its tracker products and its two year fixed rate is now at 4.54%. So the tracker which would provide the most benefit both now and in the future (if rates are cut further) has disappeared altogether and the fixed rate has come down by 10% or so against the backdrop of a 60% fall in base rates!
The banks are clearly using the current interest rate climate to rebuild capital reserves which have been decimated by recent events. As I have stated previously investors looking to refinance property portfolios or selectively acquire property should look at current financing as “bridge finance†until markets return to normal.
Add comment November 21st, 2008
There is a common view that the Buy to Let market in the UK has died and that the principle reason for this is a lack of appetite amongst banks to provide mortgage finance. Whilst it is correct that a number of banks have withdrawn from the market, Mortgage Express, who were one of the largest providers have withdrawn from this market completely, there are still several lenders that are active in the market.
Rates may be slightly higher and Loan to Values (LTV) may be slightly lower but for deals that are well priced financing is still available. If you assume finance of 65-70% and an interest rate of 6.5%-7% you will not be disappointed.
Whilst the figures above may not at first seem appealing, as Dipen has noted in his blog yesterday this my be a once in a generation opportunity to acquire capital assets at sensible prices thereby allowing any acquisition to be cash positive even at current interest rates. The finance available at present should be seen as “bridging finance†until finance markets return to more normal levels and when looked at in this way the investment decisions that you make now will start to look very astute.
Add comment August 4th, 2008
Many people are starting to question whether we are approaching the bottom of the market. I believe that we are close to the bottom but not quote there yet, In the next 6 months, market conditions will remain broadly similar to what we are experiencing and I believe that we will see one more poor reporting season from the banks. However, in the first quarter 2009, the election of a new American President, Barack Obama (?), will undoubtedly be a catalyst to inspiring trust and confidence which I believe is missing in the market at the moment.
With a new President comes a new economic policy. By that stage America will have been in a 2 year downturn. The Americans that I know will undoubtedly be saying that is enough and that it is “Time to pull ourselves up by our boot straps and get on with itâ€
In the first quarter, banking balance sheets will be returning to normal and pre crunch. Expect to see a higher degree of liquidity than before the crunch with more confidence returning to the banking sector and the world’s number one power getting back in the driving seat. Also expect trading conditions to improve and a return to securitisation which will both help and support lenders balance sheets thus also bringing some competition to the market which is greatly needed. So, I would predict the beginnings of the norm to return towards the end of the first quarter 2009, with the norm returning in the second quarter of 2009. One caveat to this though is that it will not be the norm of 2006, 2007, but the norm of 2003, 2004, 2005.
1 comment June 13th, 2008
The Bank of England left UK base rates unchanged last month in it latest decision announced last Thursday. The decision to hold rates had been widely expected. Rising food and fuel prices pushed inflation to 3% in April, well above the governments’ target of 2%. Anyone who has witnessed the nearly daily hike in petrol prices will find it hard to believe that inflation is only 3%!
The MPC has already cut interest rates three times since December in an attempt to help the slowing economy. However, the economic slowdown and falling house prices had led some to call for another cut in rates to boost spending. However, in reality the bank had little choice with oil and commodity prices continuing to move higher, the Office for National Statistics announced today (9 June) that UK producer prices growth was at a record level. In May alone, the output prices for the sale of manufactured products grew by 8.9% in the year to 31 May.
The impact on UK house prices is clearly there for all to see with House prices falling as the credit crunch makes lenders reluctant to provide mortgages. The latest figures from the biggest mortgage lender, the Halifax, showed a 2.4% fall in house prices during May. On Wednesday, the Home Builders Federation called for a half-point cut in interest rates to 4.5%, saying a cut was “imperative†to avoid a severe housing market slowdown. It appears that this slowdown may already be happening. A couple of weeks ago a member of the QIS team met a Senior Board member of a major UK Housebuilder, who noted that whilst viewings at show homes were down 10-15% (not too bad by my estimation) that actual sales were down close to 60%. The message was clear, “the buyers are out there but lenders are not willing to provide mortgages†Lenders continue to monitor the market closely and are clearly looking to manage their application levels using rate changes. Last week two major lenders, Nationwide and Alliance & Leicester increased fixed and tracker rates by some 0.3%, despite their being no change in base rates. This follows, the Abbey who cut rates a few weeks back, to be the market leader, but promptly increased them when they were flooded by new mortgage applications. I suspect that we will see more of this in the coming weeks.
The outlook for European rates is no better with inflation (3.6%) still the main stumbling block for a cut in interest rates which have been kept on hold since July 07. Indeed announcing that rates were being held last week, Jean Claude Trichet, stated that there was the possibility that rates would need to rise in the near future to calm inflation before we ECB council would consider rate cuts.
We await the various central banks next move with interest.
QIS provides outstanding property investment opportunities to our clients from carefully selected partners around the world based on a professional and thorough due diligence approach. Here we try to share industry insights written in a personal manner. Please feel free to get in touch and let us know your thoughts!