The news this week is not good reading for many of us in the mortgage market, and it seems the back-to-work blues after the long Summer holiday have hit home early.
You can’t escape the news of the US non-conforming crisis in the press. This time we have the news in MA that Barclays has been forced to call on the Bank of England’s emergency funds due to a ‘technical breakdown’ in the UK clearing system. With LIBOR running at 6.8 per cent as I write, you can probably understand how technical things are getting.
The crisis is reported to be hitting jobs in the banking sector, according to FSA, as the liquidity crunch hits home, while we have seen sweeping criteria changes from the likes of GMAC-RFC and Mortgages plc. MM has been talking to some prime lenders who believe they will also start to feel the impact as the credit crunch forces them to tighten criteria even to consumers with clean credit records.
While the non-conforming market is still trying to find some solid ground, there is some disturbing news in MS. The Royal Institute of Chartered Surveyors has reported repossessions are up 32 per cent in Q2 this year compared with Q1, and estimates the total number for 2007 to be 45,000 – a 50 per cent rise. No surprise really, as those people who need to re-finance quickly are struggling to find a lender willing to help.
Housing and repossessions
MI is reporting Alliance & Leicester research that claims 63 per cent of brokers would welcome more regulation. This time it is the buy-to-let market, which, if you believe the Council of Mortgage Lenders’ data, is still growing. The market is worth £38 billion, but just the ‘let-to-buy’ element of the business is currently in a regulated environment. Articles in both FA and MM are both predicting house price falls – one stating by as much as 30 per cent in some areas of the country.
This again is based on the US, where they have seen homes fall in value by 18 per cent in the past 12 months amid warnings from a former US Treasury Secretary that they are heading for a recession. On the positive side, July lending was up by 12 per cent at £21.3 billion according to the BBA, reflecting the high levels of remortgaging taking place at the moment, while the average first-time buyer (FTB) now has get a mortgage £108,000 – up from the £36,000 they had to secure 10 years ago to get onto the property ladder. Compare this to the FTB’s average income; in 1996 it was £17,300, now it stands at just under £34,000. You can see why affordability is key to lending in this market.
Fraud
The discovery of the Thamesmead fraud also gets plenty of column inches, especially with the size of the potential profit to be made out of the illegal activity. With figures of £4 million being banded around as the amount of money to be made, it’s easy to see why this activity is so attractive to the criminal element. There are calls to improve the information brokers receive to help them spot fraud much earlier in the process.
Finally, as we see the extension of Home Information Packs in England and Wales extended to three-bed properties, there is plenty of comment about the value of Energy Performance Certificates (EPC). Research in MI indicates that a third of us would be influenced by the EPC in the pack in our purchase decision. Further research by Halifax suggests half of us want to live in detached houses with one in five preferring a new build property and 30 per cent in the country.
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