Good news for older borrowers

For older borrowers, securing a mortgage from a high street lender has become something of a challenge in recent years, following the Mortgage Market Review and subsequent tougher underwriting criteria. 

With the population living longer however, and our working habits evolving as a result, there have been widespread calls for the mortgage industry to adapt their policies and do more to help what is considered to be a neglected area of the market. 

Rising house prices have meant that First Time Buyers are buying later in life, often in their thirties, and taking longer mortgage terms of 30 years or more to make their loans more affordable, so the requirement for lending into retirement is set to continue.

The good news is that mainstream lenders have now begun to respond to the growing demand for change. In recent weeks Halifax has announced a lift in the maximum age at the end of the mortgage term from 75 to 80, a move which was followed by Nationwide, which plans to increase its limit by 10 years to 85. 

There will of course be restrictions on lending – borrowers will have to prove that they have adequate income into retirement, and Nationwide has put a maximum loan of £150,000 in place, with equity of at least 40% required. 

Changes like this could open up options for many borrowers who are considered to be ‘mortgage prisoners’ – for example homeowners with interest only mortgages who wish to switch to repayment and require a longer mortgage term to make their loan affordable. 

Smaller building societies, such as National Counties – who can lend up to the age of 89, have had a more individual approach to lending for some time, but these most recent changes are being viewed by the industry as a step in the right direction for mainstream lending.

Guild Mortgage Service, Provided by London & Country Mortgages

This month has seen the release of a number of statistics suggesting a weakening of the UK economy. The Office for National Statistics (the ONS) reported that, in February, the UK’s industrial output saw its biggest decline since August 2013, falling by 0.5 per cent from a year earlier. Over the same period, manufacturing output was down 1.8 per cent. These figures were weaker than expected, raising fears over the growth prospects of the UK economy for the first quarter of 2016. Separate ONS figures revealed that the UK’s trade deficit in February was also worse than expected.

New data on productivity from the ONS showed that worker output per hour in the UK fell 1.2 per cent during the last three months of 2015 compared with the previous quarter. Over the same period, manufacturing output fell by 2 per cent and the service sector dropped by 0.7 per cent. Nevertheless, over 2015 as a whole, output per hour rose by 1 per cent, which the ONS said was the strongest increase since 2011. As productivity is critical to economic growth potential, economists are concerned as to whether the fourth quarter figures mark a temporary relapse or hint at problems to come.

A slowdown in the UK’s economic growth appears to be supported by a survey just published by the British Chambers of Commerce (the BCC), which looked at key indicators such as sales and orders, confidence and investment intentions in more than 8,500 firms. It showed historically low confidence in turnover and profitability and further suggested that domestic sales and orders in service firms fell in the first quarter of the year to their lowest level in three years; manufacturers also reported a fall in domestic sales.

The Halifax has recently said that the housing market could slow down because of ‘worsening sentiment’ regarding the UK economy and amid the uncertainty over the pending EU referendum on 23 June. However, it also said that house price growth is likely to remain generally robust in the months ahead because the number of homes on the market is still outstripped by demand, and because interest rates and unemployment remain low.

Regarding interest rates, the Bank of England’s Monetary Policy Committee (MPC) voted unanimously at its monthly meeting on 16 March to maintain the Bank Rate at 0.5 per cent and to maintain the stock of purchased assets financed by the issuance of central bank reserves at £375 billion.  

LAND REGISTRY DATA: FEBRUARY 2016 (released 30 March 2016)

The February 2016 Land Registry data showed a monthly drop in average house prices across England and Wales of minus 0.2 per cent, while the annual increase was 6.1 per cent. The average house price in England & Wales now stands at £190,275 and in London at £530,368. 

Regionally, the highest monthly increase was seen in the North West at 1.8 per cent, followed by the East Midlands at 1.5 per cent; prices decreased in Wales, the West Midlands and the North East by minus 0.1 per cent, minus 0.3 per cent and minus 1.2 per cent respectively. London saw the highest annual increase in prices at 13.5 per cent, followed by the South East at 10.9 per cent, while the North East saw a fall of minus 3.2 per cent. 

In terms of property type, semi-detached properties showed the highest annual increase at 6.4 per cent, while the lowest increase was seen in detached properties at 5.7 per cent.

By county and unitary authority, the strongest monthly growth was seen in Blaenau Gwent with an increase of 9.4 per cent, while Flintshire had the most significant monthly drop with a movement of minus 1.4 per cent. Four counties and unitary authorities saw no monthly price change. On an annual basis, eleven counties and unitary authorities experienced a fall in prices, the greatest being Rhondda Cynon Taff at minus 2.4 per cent; Slough showed the highest annual rise at 19 per cent. 

Of the metropolitan districts, Barnsley saw the highest monthly price increase at 3.2 per cent; ten districts experienced a monthly fall, the greatest being Doncaster at minus 1.2 per cent. Knowsley continued to show the largest annual price increase at 8.1 per cent; four districts saw a fall over the 12-month period, the greatest being Rochdale at minus 1.8 per cent. 

Of the London boroughs, Hammersmith & Fulham experienced the highest monthly price increase at 2.2 per cent, while Merton saw the greatest monthly fall at minus 0.8 per cent. Hillingdon had the highest annual price rise at 17.1 per cent, while Camden again saw the smallest annual increase at 3.6 per cent.

The volume of properties sold in December 2015 was 6 per cent lower than a year earlier in England and Wales and 12 per cent lower in London. Over the same period, the number of properties sold for more than £1 million across England and Wales as a whole and in London rose by 2 per cent. 

Month on month, the total number of properties sold across England and Wales increased from 72,167 in November to 73,326 in December 2015 – an increase of 1.6 per cent. The number of property transactions from September 2015 to December 2015 averaged 78,778 per month, compared to 79,237 over the same period a year earlier.

Economic News 01 March 2016

The first two monthly meetings this year of the Bank of England’s Monetary Policy Committee saw the interest rate held at 0.5 per cent and the stock of purchased assets financed by the issuance of central bank reserves maintained at £375 billion. A majority vote in January was followed by a unanimous decision in February. 

The Bank of England’s decision on the level of interest is largely based on assessments and forecasts of economic growth, unemployment and inflation, particularly core inflation, which strips out the impact of changing food and petrol prices. In January, core inflation fell to 1.2 per cent from 1.4 per cent in December. The broader measure of Consumer Price Inflation rose to 0.3 per cent in January from 0.2 per cent in December due to fuel prices falling by less in January that they did at the same point in the previous year. Consumer Price Inflation is well below the Government’s target level of 2 per cent and analysts now believe it will stay below 1 per cent for the whole of 2016. Interest rates are now expected to stay at their historic lows well into 2017. 

Consumer prices in the Eurozone fell sharply in February to minus 0.2 per cent, driven down by an 8 per cent fall in energy prices. In response, the European Central Bank has already announced a cut to its negative bank deposit rate and further stimulus measures are anticipated.

Newly released figures on household credit from the Bank of England reveal that in January, UK consumers borrowed a further £1.6 billion, the second highest level for more than a decade. Unsecured consumer credit rose by 9.1 per cent compared to the same month a year ago. The Governor of the Bank of England, Mark Carney, has warned that the rising level of household debt is an indirect threat to Britain’s economic recovery. 

The Bank also reported that 74,581 mortgages were approved in January, the highest level since January 2014. The Council of Mortgage Lenders and the Royal Institution of Chartered Surveyors had earlier reported a surge in buy-to-let landlords purchasing property ahead of the stamp duty changes in April, exerting upward pressure on house prices.

New figures from the Department for Communities and Local Government show that 37,080 new homes were started in the last quarter of 2015, up 23 per cent over the preceding year, while completions were up by 22 per cent at 37,230. In the year up to December, 143,560 new homes were started, an increase of 6 per cent over 2014 and 91 per cent up on the slump recorded in 2009. 

The Office for National Statistics confirmed the twelfth consecutive quarter of growth for the UK economy with a figure of 0.5 per cent in the three months to the end of December. This was largely due to the buoyant services sector, which grew by 0.7 per cent. Despite the steady expansion to date, the Chancellor, George Osborne, warned about the future effects of turbulence in the global economy.

LAND REGISTRY DATA: JANUARY 2016 (released 26 February 2016)

The January 2016 Land Registry data showed a monthly increase in average house prices across England and Wales of 2.5 per cent and an annual increase of 7.1 per cent. 

Regionally, the highest monthly increase was seen in Wales at 3.7 per cent, followed by London at 2.8 per cent; prices decreased in the North West and the North East by 0.4 per cent and 1.6 per cent respectively.

The average house price in England & Wales now stands at £191,812 and in London at £530,409. London saw the highest annual increase in prices at 13.9 per cent, followed by the South East at 10.7 per cent and the East at 8.9 per cent. The lowest annual increase was seen in the North East at 0.2 per cent, but no region experienced a fall. In terms of property type, flats and maisonettes showed the highest annual increase at 8.2 per cent, while the lowest increase was seen in semi-detached properties at 6.5 per cent.

In greater detail, eleven counties and unitary authorities saw an annual fall in prices, the greatest again being Hartlepool at minus 3.8 per cent; Reading continued to experience the highest annual rise at 16.1 per cent. The strongest monthly growth was seen in the Isle of Anglesey with an increase of 4.1 per cent, while Blaenau Gwent had the most significant monthly drop at minus 3.5 per cent. Six counties and unitary authorities saw no monthly price change.

Of the metropolitan districts, Knowsley continued to show the largest annual price increase at 8.8 per cent; only two districts saw a fall, the greatest being Sunderland at minus 3.2 per cent. Newcastle upon Tyne experienced the highest monthly price increase at 2.1 per cent, while Liverpool and Knowsley both saw the greatest monthly fall, each with a movement of minus 1.5 per cent.

Of the London boroughs, Hillingdon had the highest annual price rise at 15.5 per cent and the highest monthly price rise at 2.4 per cent. Camden saw the smallest annual increase at 3.0 per cent, while both Camden and Islington experienced the only monthly fall, each with a movement of minus 0.4 per cent. 

The volume of properties sold in November 2015 was 2 per cent lower than a year earlier in England and Wales and 7 per cent lower in London. Over the same period, properties sold for more than £1 million across England and Wales as a whole rose by 14 per cent and in London by 9 per cent. 

Month on month, the total number of properties sold across England and Wales fell from 79960 in October to 72167 in November – a fall of 9.7 per cent. The number of property transactions from August 2015 to November 2015 averaged 78,652 per month, compared to 81,656 over the same period a year earlier.