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.

Millions of pounds of taxpayers’ money will be used to overpay mortgages after the Chancellor extended the Government’s mortgage rescue scheme for another six months at a fixed rate of 6.08 per cent. More than 200,000 people on certain benefits are covered by the scheme, which was set up to help families to avoid repossession. Industry figures suggest that about a third of homeowners are on standard variable rate and 15 per cent are on tracker deals. The average interest rates on these mortgages are only 4.1 per cent and 3.65 per cent respectively, well below the rate paid by the scheme.

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.

Around 300,000 people who had hoped to pay off their mortgage this year face shortfalls. They are all victims of missselling of 25 year with-profits endowment policies. Almost three million more people will suffer a similar fate in the next few years, according to the Association of British Insurers. At the peak of the 80s housing boom, homebuyers were encouraged to take interest-only mortgages and rely on investment returns from an endowment to repay the loan at the end of the term, usually 25 years. In the 90s, £50 a month policies regularly turned a £15,000 investment into a £100,000 return.  Today, they commonly pay out less than £30,000 for the same 25-year investment.

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.

With a growing number of Americans facing negative equity and becoming ever more pessimistic about the prospects of house prices recovering to make up that difference, they are surrendering to foreclosure even though they can still meet the repayments, according to reports. The trend is clear in recent rates of non-payment, or delinquency, on mortgages. In January, delinquencies on outstanding ‘jumbo’ mortgages - big loans granted to people with good credit histories - rose to 9.6 per cent, according to Fitch Ratings. Many of these problem loans, which have gone unserviced for 60 days or more, were taken out after 2005. And nonpayment is increasing not just in hard-hit states such as California: in New York, Florida, Virginia and New Jersey they are all on the rise too.

Gross mortgage lending in January fell to the lowest level in 10 years as buyers were deterred by the end of the stamp duty holiday, figures showed this week – but experts have warned that lending could decline further as banks lose government funding support. According to the Council of Mortgage Lenders (CML), gross mortgages totalled just £9.1bn in January, down 32 per cent from the £13.4bn in December. This is the lowest monthly total since February 2000, when gross lending was £7.9bn. While a seasonal fall is usual between December and January, the CML said the drop was ‘larger than average’ due to higher purchase activity in December, as borrowers rushed to take advantage of the stamp duty holiday on properties valued less than £175,000.

John Healey has extended the government’s campaign to help struggling homeowners get a grip on their finances and avoid repossession. Over 330,000 households have had help and advice with their mortgages over the past year. But with the pressure on families likely to remain high throughout 2010, starting this week the government is working with CAB to run a string of local help events in 56 repossession ‘hotspots’, so that struggling homeowners can get impartial face-to-face help and advice to keep their home. New radio and local press advertising in all 56 areas will also promote the free telephone advice line and special website to help homeowners struggling with their mortgage payments.

Hundreds of thousands of homeowners could be in line to collect hefty refunds for unfair mortgage charges as lenders face being forced to hand back millions of pounds in fees imposed on customers who missed their monthly loan payments. One firm has been fined £2.8million and made to return £7.7million to borrowers when it was found to have acted unfairly. The crackdown by the Financial Services Authority is likely to lead to claims by hundreds of thousands of home owners who believe they have been harshly penalised.