Growth in remortgages as purchases decrease

This month’s best buy mortgage tracker from Hamptons International Mortgages shows that as a proportion of all lending, home purchasing dropped nearly 12% in the last six months.

Purchases fell by nearly 5% since last month, while home remortgages, have risen by nearly 9% since March and have increased almost 10% since August.Lack of confidence in the market in light of the Northern Rock crisis in August been suggested as a key factor leading to the decline in home purchase this month and potential homemovers may now be choosing to remortgage their existing properties

Government urged to support BTL

The Building Societies Association (BSA) has called on the Government to support the buy-to-let sector in its response to the Housing Green Paper.

The report notes the buy-to-let market now accounts for around 10% of the mortgage market.It states: “[Buy to let] plays an important role in increasing the range of tenures available, and plays a particularly important role in housing young professionals unable to afford to buy but also unable to access social housing provision. As such we believe that Government should seek to support the buy to let sector and allow it to prosper.”

The Council of Mortgage Lenders has also published its response, urging the Government to simplify the current range of “confusing” low-cost home-ownership schemes.

HIPs on hold

The full Home Information Pack (HIP) roll out has been put on hold due to market conditions.

The volatility currently being experienced in the mortgage market has had a bearing on the planned HIP roll out, which has now been pushed back until the market stabilises again.

Speaking at the Association of Home Information Pack Providers’ (AHIPP) annual conference, the Rt. Hon. Iain Wright, Parliamentary Under Secretary of State for Housing and Planning said that this volatility was the only reason for postponing HIPs once more.

“This news will also be welcomed by the many Home Inspectors and Domestic Energy Assessors who are ready to support the final phase of implementation. With over 7,000 trained and accredited, we now look forward to this critical next stage where, at last, the real benefit of HIPs will be felt and real reform can begin.”

Northern Rock faces MP scrutiny

Northern Rock’s executives are to face the Treasury Select Committee to analyse what exactly went wrong.

The bank’s chief executive, Adam Applegarth, is likely to bear the brunt of an extremely tough grilling over Northern Rock’s business model and its actions following crisis talks with the Bank of England (BoE)

Mervyn King, head of the BoE has already faced the MPs’ hard line of questioning over the BoE’s actions in the matter.

Northern Rock’s reputation has been irreparably damaged by the events over the past month. It is in dire need of a complete rebrand before it begins to regain consumer confidence.

The failure of its business model was the catalyst for the crisis - leaving it very much in the line of fire for today’s questioning. This is because most of the money it raised for mortgages was raised through the wholesale credit market - primarily by selling the debt on in the form of bonds.

Over two thirds of its mortgage products have been pulled in the wake of the crisis, with its market value plunging by 60 per cent.

Fixed or Discount Rates?

Whilst the non-conforming sector of the market continues to be flooded with rising rates and tightening criteria, the prime market is reacting to the stable base rate and falling swap rates with fixed and variable products levelling off at very similar prices.

“The mortgage market has fallen into a lull - the volume of rate changes has fallen dramatically and very few providers are launching any products to differentiate themselves. Fixed rate deals no longer come at a premium, and can sometimes cost less than a discounted deal.

“With surprising variable rate increases of late, combined with the more important reduction in fixed rates, there is little or no difference between the cost of a fixed rate or variable rate.


“With falling rates comes increased demand and benefit to be had from variable products - a variable rate may seem more attractive than it has done over the past couple of years.

“While swap rates rose, lenders were reacting immediately, but now that the shoe is on the other foot and rates are falling, it seems lenders are more reluctant to reduce their rates than they were to put them up.

“Perhaps the levelling of cost between fixed and variable rates is not what Alistair Darling wants to see. His solution to housing affordability sits strongly with encouraging long term fixed deals. With the difference in cost now not even a consideration when choosing between a fixed or variable deal, it’s an ideal opportunity for borrowers to choose a deal based on their individual needs and predictions of future rate changes.

“However should any external influence hit the market, particularly with a rate change, the scales will tilt and this equilibrium is sure to be short lived.”

Changes for tenant on benefits to impact landlords

Implementation of the Government’s new Local Housing Allowance (LHA) for recipients of the existing Housing Benefit (HB) will have implications for landlords who provide privately rented accommodation to people on benefit.

In the majority of cases the LHA will be paid to the tenant, who will take over responsibility for paying rent to the landlord. This represents a significant change from the existing procedure whereby HB can be paid direct to the landlord.Part of the Welfare Reform Act 2007, the LHA has been introduced in a small number of pilot local authorities and will be rolled out nationally from 7 April 2008.

David Salusbury, chairman of the National Landlord’s Association (NLA), said could lead to less security for landlords as it could lead tenants falling into arrears. He added: “This leaves open the possibility that the tenant may be tempted to use the money for something else and not pay their rent. This might be because of other pressing financial needs. Ultimately that could threaten the security of their home.”

Virgin in talks to take over Northern Rock

Virgin Group is reported to be in talks to form a consortium with Northern Rock.

The company is said to be discussing with a group of Middle East and US investors about forming a consortium which would inject funds into the bank in return for a controlling stake, according to the national press. The company could make a statement today about its intentions.If the talks are successful, Virgin will take over the day to day running of the business and incorporate it under its Virgin Money brand which offers mortgages, credit cards and insurance services.

RICS report housing market slowdown

The housing market is slowing down at the fastest rate in more four years, according to the latest results from the Royal Institution of Chartered Surveyors (RICS).

According to its monthly market survey, house prices have fallen for the second month in a row, promoting fears of a downturn in the market. The survey shows new buyer enquiries have dropped for the tenth consecutive month, it also shows 14.6% of chartered surveyors reported a fall rather than a rise in prices.

CML response to BOE rate hold

Responding to today's MPC decision to hold interest rates at 5.75%, the Council of Mortgage Lenders says that the hold was widely expected but that a cut in November remains the most likely prospect.

Michael Coogan, CML Director General, commented:

"We did not expect the Bank to cut rates today, but we do hope for and anticipate a cut in November. Even this is not a certainty though, so borrowers should continue to plan for rates at or around current levels. Pricing in the mainstream market is stable, and fixed rates have started falling recently, but there is still uncertainty about how long it will take for stable funding to return to the sub-prime market. In the meantime, borrowers in this sector are facing tighter criteria and higher rates, although the availability of funding does seem to be improving."