Mortgage lending started slowly in 2015 according to a trade body.
Gross mortgage lending for the first quarter of this year was down 12% from the previous three months at £44.9 billion, the Council of Mortgage Lenders (CML) said.
This marked a 3% decrease on the same period in 2014.
But the CML said that lending in March was much higher than February.
Total lending through home loans reached £16.5 billion in March, some 21% higher than February and 7% higher than March last year.
“The underlying lending picture is stabilising,” said Bob Pannell, chief economist of the CML.
“Sentiment and activity are showing early signs of improvement, and should be further supported by the effects of stamp duty reform. We expect to see lending strengthen over the next few months, albeit from a relatively sluggish start in 2015.”
Lenders have been cutting their mortgage rates in recent weeks, with little prospect of the Bank of England’s base rate rising during the rest of the year.
The National Association of Estate Agents (NAEA) said that stricter affordability checks were slowing down the process of home buying.
The changes, which came into force a year ago, require lenders to study mortgage applicants’ incomings and outgoings, and test whether buyers can cover repayments if interest rates were to rise.
“A drop in the number of buyers is the direct result of a slow-down in acceptance of mortgages, with it now taking an average of 50 days to receive a mortgage offer,” said Mark Hayward, managing director of the NAEA.
“This increases the risk that sales won’t go through and puts unnecessary pressure on any chain transactions.”
There are an estimated 11.1 million residential mortgages in the UK, with loans worth over £1.3 trillion
Borrowers wanting low mortgage rates are being warned about high application fees.
It follows news that the Co-operative Bank is launching a two year fixed mortgage at 1.09%, said to be the lowest rate ever.
Two weeks ago HSBC announced a five year fixed rate mortgage at a record low of 1.99%.
But experts say borrowers need to look closely at the fees involved, and the rates people will be charged when the fixed-rate period is finished.
Anyone wanting to take out one of the above mortgages will have to pay an application fee of £1,500.
The average fee for taking out a mortgage is only £920.
“These rates come at a cost,” said Rachel Springall of Moneyfacts. “If you think you are going to have to move your mortgage again in two years time, you’ve got to think whether you are going to have to pay another fee.”
The Co-op’s rate of 1.09% is only available to borrowers with a 40% deposit.
Customers are also being warned about the so-called “reversion rate” – the interest they will be charged at the end of the fixed term period, if they don’t move elsewhere.
In the case of the Co-op, the reversion rate is a relatively high 4.74%.
Some experts believe mortgage rates could go even lower still.
“We’re going to see a few months yet of this price war,” said Rachel Springall.
Economists expect the Bank of England to maintain base rates at their current low of 0.5% until February 2016.
However mortgage interest rates are expected to rise as that date approaches.
One of the few affordable homes in London could be a house boat.
The homeless charity Shelter has claimed that only 43 homes for sale in the city ranked as affordable for those on an average wage.
Four of those were houseboats, and one was a mobile home.
The research suggested that 80% of properties in England were unaffordable for families looking to buy a home for the first time.
It used a typical income and mortgage criteria as the basis for its affordability test.
The houseboats cost up to £165,000 each, and the mobile home cost £125,000.
But in 10% of local authority areas there were no affordable homes for sale at all.
These included areas like Chelmsford in Essex, Watford in Hertfordshire, and Gravesham in Kent.
“Over 80% of homes on the market are off limits for a typical family, and this is nothing short of a scandal,” said Campbell Robb, Shelter’s chief executive.
The figures were calculated according to local wage variations – and being offered mortgages on the basis of 3.4 times income.
For families that need at least two bedrooms, just 17% of properties are affordable, according to Shelter. For those needing three bedrooms, 7% are affordable.
To compounrd the problem house prices across the UK are resuming an upward trend, according to the Nationwide building society.
Between March and April, prices rose by 1% – the largest monthly rise since June 2014.
And the annual pace of growth rose to 5.2%, the first time that this measure has risen in seven months.
The average house price is now £193,048 – the highest figure yet recorded by Nationwide and the first time prices have exceeded £190,000.
The news from Nationwide follows reports from the High Street banks this week that the number of mortgage approvals is also rising.
The British Bankers’ Association (BBA) said approvals were now at their highest level for six months, although still 14% down on their recent peak in March 2014.
40% of mortgage holders may not be able to move because they will not get a remortgage.
The growing number of potential mortgage prisoners is thought to be as many as four million as a result of stricter checks on mortgage applicants which wer were brought in a year ago.
Many lenders are strictly applying checks despite “transitional provisions” allowing banks to show flexibility if existing customers want to move or remortgage.
As a result, some people are trapped in a mortgage deal or have to pay much more.
“It is a crazy situation,” said Ray Boulger, of mortgage brokers, John Charcol.
He has calculated that up to four million people, or 40% of those who have a residential mortgage, could be affected in one way or another.
“People who have a perfectly good track record on their current mortgage and don’t want to borrow more money are finding they are being refused because of these new rules and the way they are being interpreted,” he said.
The rules, imposed a year ago by the Financial Conduct Authority, require lenders to take a detailed look at bank statements.
Some have been scrutinising the cost of gym memberships, milk bills, childcare and pension contributions, creating a trap for home movers.
Also on the danger list are owners with interest only mortgages, the self employed and people who are deemed too old to borrow.
The Council of Mortgage Lenders (CML) said stricter treatment could be justified, even though transitional provisions drawn up by the regulator, the FCA, allow providers to make exceptions as long as applicants are not increasing their borrowing.
Paul Smee, the CML’s director general, said that a review of affordability could be in the customer’s best interest.
“The rules are tougher for a reason and the industry has to work within them,” he said. “If there are areas where there are glitches, then or course we must look at ways around the glitches.”
But Pat Bunton, chairman of the Association of Mortgage Intermediaries, said that captive customers were being treated unfairly and that “large swathes of prime customers are trapped”.
He advised victims to consider taking their cases to the Financial Ombudsman Service.
The Ombudsman Service has already upheld some complaints over portable mortgages.
“We will need to see good reasons from the lender as to why they won’t allow them to port their mortgage,” a spokesman for the service said.
“We also have questions for lenders who decline to offer lending despite consumers financial circumstances not changing, or in many cases getting better or more consistent.”
“If the risk hasn’t changed – or has lessened – we may ask a lender to reconsider if they can’t demonstrate good reasons for declining to port the mortgage.”
The demand for high value mortgages has dropped according to lenders.
The general election campaign is also expected to affect the UK housing market.
Demand for mortgages fell sharply in the first quarter of the year in the UK, according to research for the Bank of England.
Lenders reported that this was the third successive quarter of falling demand, the bank’s Credit Conditions Survey found.
Mortgages for high value property saw the biggest fall in demand since the third quarter of 2008.
Demand is however expected to bounce back in the second quarter.
Some lenders attributed the fall in demand over recent quarters to a combination of changes in regulatory policy and concerns about housing affordability, as well as uncertainty about the outlook for the housing market.
However, the predicted recovery might point to the effect of the general election campaign on the UK housing market.
Many prime and super prime buyers are sitting on their hands and want to see what the next government looks like before they commit to a purchase. That this is the most uncertain election in decades has certainly triggered more caution at this level of the market than normal.
The survey suggested that lenders were showing a greater willingness to lend to borrowers who were only able to offer a deposit of less than 10% of the property’s value so far this year. Many of these borrowers would be first time buyers.
The mixed UK property market is claiming more problems as Kingfisher, the owner of the DIY chain B&Q is to close about 60 B&Q stores in the UK.
However, Kingfisher plans to open 60 new outlets under its Screwfix brand this year.
“Kingfisher has said for some time that B&Q UK can adequately meet local customer needs from fewer stores and that some of the stores should be smaller,” it said in a statement.
Kingfisher also announced a 15.2% fall in pre-tax profit to £644 million for 2014.
And in a separate announcement, it said that Kevin O’Byrne, chief executive for B&Q UK & Ireland, would leave the firm on 15 May 2015 “allowing a smooth handover of his responsibilities” with further details to be announced “in due course”.
The store closures, which will result in a £350 million one off cost, mark Veronique Laury’s first major move as chief executive. The former Castorama boss took over from Sir Ian Cheshire as chief executive last September.
The firm, which currently has 360 B&Q stores, has so far confirmed the locations of six store closures: Southampton, Dundee, Baums Lane in Mansfield, Station Road in Stechford in Birmingham, Hyde in Greater Manchester, and Barnsley.
But it said the impact on jobs from the B&Q store closure plan is expected to broadly neutral due to the planned Screwfix openings, which will create 900 new jobs, and plans to redeploy staff to other parts of the business.
B&Q said top executives’ roles would now be more focused on the entire company, it would cut the number of products it sold, as well as unify its IT platform across the group.
Other plans include making the most of its vacant store space and it said it was in discussions with several retailers about sub-letting opportunities.
“We are getting on with this at real pace,” it added.
The announcement comes a day after the group, which also owns Castorama and Brico Depot in France, walked away from its planned €275 million purchase of French DIY chain Mr Bricolage after one of the latter’s shareholders opposed the deal.
The firm’s performance in France continued to be weak, with sales down 6.6% for the year, which it blamed on “an ongoing soft market”, driven by weak consumer confidence and a declining housing and construction market.
But in the UK and Ireland, sales rose 5.4%, which it said reflected a stronger UK economy and more buoyant housing construction.
The number of mortgages being granted across the UK hit a six month high in February the Bank of England data show.
During the month of February, 61,760 mortgages were approved – just over a thousand more than in January.
It was the third month in a row that approvals have risen- and the highest figure since August 2014.
Even though the rise was small, economists said it indicated that the housing market had bottomed out, and was now facing a steady improvement.
Nevertheless the number of approvals is still well below the recent peak of 75,453 in January 2014.
The growing confidence of borrowers in mortgages is also evident as demand for loans and overdrafts are also increasing.
Borrowers are becoming more confident in taking out personal loans and overdrafts, according to the High Street banks.
Annual growth in this type of borrowing, of 4.4% in February, was the fastest in six years, the British Bankers’ Association (BBA) said.
During and after the financial crisis, consumers were more cautious.
There are fears that some people in debt could suffer were interest rates to rise from their historic low.
Some people may now be deciding to borrow to make purchases that they had put off in recent years.
“Demand for loans and other types of personal borrowing is rising at its fastest rate since the financial crisis,” said Richard Woolhouse, chief economist at the BBA.
“Consumers are feeling increasingly confident about buying big ticket items, such as cars or home improvements, as the recovery really begins to take hold.”
However, he pointed out that saving in banks had slowed, partly owing to the comparatively high rates offered for new Pensioner Bonds.
Mortgage lending to home buyers went through an unexpectedly large dip at the start of 2015.
The Council of Mortgage Lenders (CML) said just 41,400 home loans were granted in January to borrowers in the UK.
That was 26% fewer than in December and- more importantly, 16% down from January last year.
The number of loans made to first time buyers was, at 19,000, the lowest monthly figure for 21 months.
The UK property market has been cooling off off since last summer, with prices more or less flat in the past few months.
The previous rapid rise in prices, along with the tighter regulation of mortgage lending, has shut some prospective buyers out of the market.
Completed sales in November, December and January – the most recent months for which data is available – were down on a year ago.
However, this lull is likely to be temporary, as figures from the Bank of England have shown that mortgage approvals for those months – the number of new loans approved but not yet lent – in fact started growing again gently.
That suggests that sales will start to pick up again in the coming months.
Paul Smee, director general of the CML, said: “The traditional beginning of year seasonal lull in lending is slightly more prominent in house purchase lending than in previous years, especially in comparison to the particularly strong levels at the start of 2014.
“Affordability constraints remain a factor for would be borrowers, but we are still projecting lending to pick up over the next few months,” he added.
The increase in the number of mortgage free homeowners means that more properties were owned outright than with a mortgage among households in England for the first time in 2013-14, figures show.
Of the 22.6 million households in England, 7.4 million owned their property outright, and 6.9 million had a mortgage, the English Housing Survey showed. The rest – 8.3 million households, rented their homes.
These numbers mark a change from an evene level among home owners a year earlier.
The data also shows that the younger generation are struggling to own.
In 2013-14, some 48% of households made up of 25 to 34-year-olds rented their home from a private landlord. This had risen from 45% a year earlier, and from 21% in 2003-04.
Over the same 10 years, owner occupation in this age group dropped from 59% to 36%.
Campbell Robb, chief executive of Shelter, said: “The shortage of affordable homes is leaving young adults with no choice but to remain stuck in their childhood bedrooms, or face decades paying out dead money to landlords.”
The English housing survey is a continuous national survey commissioned by the Department for Communities and Local Government (DCLG). It collects information about people’s housing circumstances and the condition and energy efficiency of housing in England.
In April 2008 the English housing survey was created by merging the English house condition survey with the survey of English housing. Information about these former surveys can be found on the National Archive.
The number of homes being built in the UK fell during the final three months of 2014- which is the first such decline for nearly two years.
The 0.2% drop in new home construction compared with a 6.1% increase in the previous quarter during the autumn.
Overall, total construction output fell by 2.1% in the quarter, the Office for National Statistics said- which was worse than an initial estimate of a 1.8% contraction.
The UK housing market has been consistently slowing over the past few months.
Last week, the latest survey from the Royal Institution of Chartered Surveyors (RICS) said that the number of new buyers approaching its estate agency members in England and Wales had fallen for the seventh month in a row.
However, a recent survey of the UK construction sector suggested that activity had picked up again in January and it was still up 18.7% from a year earlier.