ROOF Blog

The number of mortgages approved for house purchase fell for the third month in a row during February as the housing market continued to show signs of slowing down, figures revealed today. A total of 47,094 loans were approved for people buying a home during the month, 21% down on the recent peak reached in November last year, according to the Bank of England. However, the Bank’s figures also showed a rise in unsecured lending during the month, with consumers taking on more debt through credit cards, personal loans and other forms of credit than at any time for 15 months.

Fears that millions of homeowners could soon be paying a heavier price for rising unemployment have been fuelled by the news that more than 20,000 people have, this month, seen the cost of mortgage payment protection insurance (MPPI) jump by about 20%. Yorkshire building society has pushed up the cost of its mortgage PPI in a move it says will typically add about £46 to the amount borrowers pay each year. The actual increases will vary, depending on the type of policy. The Yorkshire’s new mortgage PPI provider, Cardif Pinnacle, said that the cost of providing this cover ‘has risen to record levels’ following a huge increase in claims, presumably from homeowners losing their jobs.

FSA figures show 54,055 people had their properties repossessed during 2009, up from 46,945 in 2008. But there was a fall in both the number of repossessions and the number of people who were unable to keep up with their mortgage during the final quarter of the year. Around 11,800 homes were repossessed during the final three months of 2009, 15% fewer than during the previous quarter. The figures are broadly in line with ones reported by the Council of Mortgage Lenders (CML) for 2009, which showed that 46,000 people had their home repossessed during the year, the highest level since 1995. The FSA’s figures are higher than the CML ones because they include second-charge mortgages and loans advanced by lenders who are not CML members.

The end of stamp duty relief at the start of the year has helped cause a substantial dip in mortgage lending during January, with just £8.02 billion lent during the month, the lowest level since March 2001. This compares with an average monthly amount of about £18 billion during 2007. The data, released by the British Bankers’ association, are the latest figures to suggest the economy will endure a slow recovery, after signs of optimism at the end of last year. A leading member of the Bank of England’s Monetary Policy Committee warned today that the housing market could be ‘weak’ during 2010.

Both the CML and the Bank of England agreed that mortgage lending edged up again in the last months of the year, against the usual seasonal downturn. The CML reported that gross mortgage lending reached an estimated £13.7bn in December, up 14 per cent on November. A rush of sales before the end of the stamp duty holiday and the prospective hike in VAT accounted for much of the improvement.

Thousands of households have taken out loans with interest rates averaging 825% during ‘the worst Christmas in a generation’ for illegal doorstep lending, according to a new report. ‘The Real Cost of Christmas’, commissioned by affordable housing provider Circle Anglia and written by the Financial Inclusion Centre, found that more than 100,000 of the UK’s poorest families will spend 2010 crippled with a combined debt of around £82m after borrowing money from loan sharks to pay for Christmas. The value of the loans is an estimated £29m, but average interest rates of 825% will mean that people end up paying nearly three times the initial amount they borrowed.

Mortgage lending fell by 10 per cent during November as the market suffered its traditional seasonal slowdown, figures showed today. A total of £12bn was advanced during the month, down from £13.3bn in October and 14 per cent less than in November last year, according to the Council of Mortgage Lenders (CML). The group said a modest decline was typically seen between October and November, although the 10 per cent fall was ‘a little larger’ than normal. But it added that market conditions were holding steady and it did not expect much change during the coming months. The CML’s economist, Paul Samter, said: ‘There could be a modest decline in underlying house buying activity in early 2010 due to the stamp duty holiday ending, with activity ‘bunching’ over the last few months of 2009.’

The number of repossessions orders taken out by mortgage lenders rose by three per cent during the third quarter of the year to 13,987, figures from the Financial Services Authority (FSA) have shown.

Despite the increase, the FSA said the number was ‘much in line’ with the average for the year as a whole and six per cent below the figure for the first quarter of the year.

The drop is likely to have been driven by interest rate cuts at the start of the year, which made mortgages more affordable, and increased government help for struggling borrowers.

The FSA said the number of borrowers who had fallen into mortgage arrears of more than 1.5 per cent of their outstanding loan had fallen for the third successive quarter, and at 46,000 was down 10 per cent on the three months between April and June and 30 per cent below the peak in the last three months of 2008.

A total of 55,300 mortgages for house purchases were granted by lenders in October, the highest number since December 2007, the Council of Mortgage Lenders (CML) said today.

Activity in the housing market has increased markedly since reaching a trough in January when just 23,000 home loans were advanced during the month.

The bulk of the market is made up of home movers, with 35,600 of October’s loans going to borrowers who already own a property, a 49 per cent increase on the same period last year.

However, first-time buyer numbers have also recovered since the start of the year, more than doubling from 8,900 in January to 19,700.

Homeowners facing repossession or struggling to meet mortgage payments after losing their jobs will continue to receive extra support from the government following the pre-Budget report.

The government has said it will freeze the standard interest rate used to calculate its Support for Mortgage Interest (SMI) at 6.08 per cent for a further six months. It said the SMI scheme has benefited around 220,000 homeowners.

From April this year, the government said it would cover the monthly interest due on mortgages of up to £200,000 for borrowers who have been out of work for three months and were having difficulty meeting their payments.

Previously it only offered support to homeowners with mortgages of £100,000 or less.