Mortgage rate warning as lending plummets
The number of mortgage loans issued to first-time buyers plummeted by 11% between October and November 2014, according to the latest statistics from the Council of Mortgage Lenders (CML).
It said mortgage lending for house purchases across all types of borrowers was down 12.4% in November; with first-time buyers taking out just 25,900 loans during the month, equating to a total of £3.8 billion – 12% down on the total amount lent to this group in October 2014.
The number of mortgage loans to home-movers and people remortgaging were also down, by 13% and 8% respectively.
Some housing critics said the decrease in mortgage lending could be explained by regulatory changes in the mortgage market. Others said consumers were apathetic about mortgage rates rising and in no rush to remortgage because they have been lulled into a false sense of security by the persistently low Bank of England base rate, which has been at 0.5% since March 2009.
Stuart Gregory, managing director at Lentune Mortgage Consultancy, said: "The remortgage market is absolutely dire. [We have the] best rates for a generation and borrowers aren't interested.
"Borrowers don't feel threatened because of continual interest rate rise denials by the Bank of England– they're playing the public. By the time it dawns on the majority of UK borrowers, fixed rates will have risen.
"Three years ago, five-year fixed-rate mortgages were over 5%; we now have ten-year deals under 3%, and no borrowers seem that interested. That's the problem with a rock-bottom Bank of England base rate – apathy."
"Is now a good time to remortgage? It depends on personal circumstances, but borrowers are doing themselves a disservice by at least not checking."
The wide availability of low-cost mortgages were also mentioned by Mark Harris, chief executive of mortgage broker SPF Private Clients. He said: "There are some cracking deals available, particularly on longer-term fixes as lenders attempt to ‘buy in' new business before the election. Rates are unprecedented, with Woolwich launching a ten-year fix pegged at just 2.99% for those prepared to take a long-term view and are worried about interest rate rises."
There was strong annual growth in the buy-to-let mortgage market, with 17,700 loans worth some £2.4 billion issued in November, the CML said – up 14% on the total value of loans issued in November 2013.
Changing mortgages without moving home. Property owners chiefly remortgage to get a better deal but some do so to release equity in their homes or to finance home improvements, the costs of which are added to the new mortgage. Even though you’re not moving house, you still need to engage solicitors, conveyancing and the new lender will require the property to be surveyed and valued.
The catch-all term applied to investors who buy properties with the sole intention of letting them to tenants rather than living in them themselves, with the proceeds from the let usually used for the repayment of the mortgage. Buy-to-let investors have to take out specialised mortgages that carry higher interest rates and require a much bigger deposit than a standard mortgage. Other expenditure can include legal fees, income tax (on the rental profits you make), capital gains tax (if you sell the property) and “void” periods when the property is unlet.
Also referred to as the bank rate or the minimum lending rate, the Bank of England base rate is the lowest rate the Bank uses to discount bills of exchange. This affects consumers as it is used by mainstream lenders and banks as the basis for calculating interest rates on mortgages, loans and savings.