Increase in Mortgage approvals to meet Lenders targets

Mortgage approvals for house purchase rose 6.7% in June, as lenders rushed to meet their half-year lending targets.

But first-time buyers suffered, as lenders continued to prefer wealthier buyers.

The claim is made this morning by e-surv, the surveying and valuations business of LSL, which is also parent group of estate agency chains Your Move and Reeds Rains.

But e-surv said that lending criteria remain tight at the bottom of the market, and June was the worst month this year for first-time buyers, with low levels of approvals on the cheapest properties.

Approvals for homes under £125,000 – typical first-time buyer properties – accounted for only 22% of total approvals in June, down from 23% in May, and the lowest level since November 2010. This contrasts with early 2008 when purchases of the cheapest property accounted for 30% of all approvals.

Approvals overall rose fastest in London, where there was a 12.3% increase, reinforcing the capital’s increasing disconnect from the rest of the UK market.

The upsurge in London activity did include an increase in the number of first-time buyers.

Although first-timer numbers fell nationally, approvals for properties up to £250,000 – typical first-timer property in the capital – accounted for 43% of all approvals in June, up from 40% in May. However, this is still well below the figure for June 2009, when 50% of all London mortgage approvals were for typical first-timer property.

Richard Sexton, business development director of e.surv, said: “There has been a great deal of recent chatter about 95% LTV products hitting the market, but if you delve beyond the headline loan-to-value ratio, it is clear criteria remain too restrictive for the majority of lower income buyers.”

He went on: “Lenders are stuck between the devil and the deep blue sea.

“On the one hand, they are bound by tighter regulatory standards and a commitment to improve their capital, while on the other they are being put under political pressure to offer more appropriate mortgage products to match the financial situations of consumers.

“They cannot do both: these contrasting pressures are entirely incompatible bedfellows.

“Lenders still have to deal with significant risks to their balance sheets so, after a concerted effort to meet lending targets for the first half of the year, the next few months could see a return to a lower level of activity as they ration funds cautiously in the third quarter.”

Google Mortgages

Google is experimenting with another foray into the mainstream UK housing market, but this time with the launch of a mortgage comparison website.

This now appears on the very top of the page when you google keywords such as ‘compare mortgages UK’, ‘mortgages UK’ and even just ‘mortgages’.

The site, which bears all the hallmarks of a trial, says it offers ‘fast, simple and clear comparison’ and invites users to say whether they are looking for a purchase mortgage or a remortgage. You then press a ‘compare’ button, without leaving the Google page.

It then switches through to the comparison page, but this currently only lists ‘sponsored’ results’ from a handful of lenders:  Woolwich, ING Direct, Lloyds TSB, NatWest and Royal Bank of Scotland.

The website, Compare UK Mortgages, follows Google’s acquisition of Beat That Quote, the UK comparison website for mortgages and other financial products, in March for £37.7m.

Analysts said then that Google only bought it to can it, in order to go after the whole industry amid rumours that Google’s IT specialists were working on a mortgage comparison website based on the software used by Beat That Quote.

At the time, Google said that with Beat That Quote’s expertise “and our technology, we will be able to provide new and innovative ways for consumers to find the right financial products and save money”.

Google is still clearly doing its homework and is using its mortgage comparison trial to run a feedback survey, asking users how they have searched for a mortgage before.

Google has a similar mortgage comparison service in the States.

In the UK, however, as agents know, property has not been altogether good news for the internet giant. It tried to launch the ultimate property search feature, using Google Maps.

Despite the fact that it was free to estate agents to use for their listings, unlike Rightmove, it failed to gain any traction and was aborted in February after just seven month – with red faces all round.

Whether the new mortgage comparison site, using the normal Google search rather than mapping, provides a re-entry into the wider housing market, such as For Sale listings, remains to be seen.

New-look EPCs to be launched next April

EPCs will be reformed and households will be given a month’s holiday from council tax return for signing up to the Green Deal.

The latter is part of an incentive trial, which is being run with Homebase, which also offers vouchers for Homebase and Argos.

Other offers being trialled offer energy efficiency products at a discount if households club together to buy them, or community rewards.

The trials are launched in a new report from the Cabinet Office’s ‘behavioural insights team’, which also says how it will ‘refresh’ EPCs.

The report says it needs to reform EPCs because currently only 18% of house buyers report that they took any notice of them in deciding on their purchase, while only 17% act on the recommendations.

From next April, EPCs will have a different front page, which will signpost the Green Deal by showing which measures are available for grant-aid under the scheme,  and detail cost savings over three years, and not just environmental consequences.

It will show the current costs of lighting, heating and hot water, and the potential costs of all three, giving the total cost-saving over three years.

In addition, the front page will list the top three recommendations, with the suggestion that payback times may also be included.

Further research on EPCs will be conducted by the behavioural insights team and Homebase.

Other ideas include setting up a network of Green Deal champions, and forthcoming work with Which? to examine what advice householders find most useful.

You can see the new-look EPCs in the report:

http://tinyurl.com/6yymob8

The 'refresh' of EPCs is not the only change mooted. CLG also wants estate agents and letting agents put an EPC report on all their marketing particulars, possibly from as early as this October, meaning extra costs of print and paper.  Have you taken part in the all-important SPLINTA survey yet? It's essential that if you have views, you make them plain now. Please refer back to previous story SPLINTA gets ready to fire up new campaign on EPCs

New 20% top-up mortgage could suit half of all buyers, says Castle Trust

There is no launch date for the new Partnership Mortgage being offered by Castle Trust, which promises to revolutionise the house-buying market.

Martyn Guerin, chief operating officer, would not commit himself to saying whether the launch would be this year. It would not necessarily immediately follow getting the required permissions from the FSA and OFT.

He said: “We will launch when we are ready  – when we are sure we have got the product right and not before. We need to get things right, because we will be in the market for a long time.”

In an interview with Estate Agent Today, Guerin admitted that there have been a number of misconceptions about the offering, which will be a 20% ‘top-up’ mortgage available only to home buyers who already have a 20% deposit.

He said it was not the case, as has been reported, that borrowers also needed to be investors in the other side of the Castle Trust offering, House Price Savings Accounts (HouSAs). He also accepted that the new mortgage will not help first-time buyers on to the housing ladder, unless they already have a 20% deposit.

He said that closer attention would be paid to communicating the  offerings from Castle Trust, which is chaired by the former FSA chairman Sir Callum McCarthy. He said: “I think sometimes you can just get too close to something, but certainly we need to be more careful in future as to how we phrase things.”

He said that on the HouSA side of the business, investors could invest for three, five or ten-year terms, at rates of between 2% and 3%, based on the Halifax House Price Survey. They will be able to choose to cash in on exit, or take a quarterly ‘voucher’, whose value would be linked to the Halifax, or could invest in both strategies.

Minimum investment would be £1,000, he confirmed. He emphasised: “This is not a capital guarantee product, but whatever the index does, the investor will outperform the Halifax.”

For example, an investor puts in £10,000 and the Halifax index stands at 100. By year five, the index stands at 150 and the value of the HouSA has gone up to £17,500. Much more complicated is what happens if the index slips, but the borrower appears to be shielded from the entire slippage.

Partnership Mortgages will allow a borrower to take out a 60% mortgage with one lender, and then a 20% second charge from Castle Trust. On this 20% mortgage, the borrower would pay no interest. In return, on the sale of the property, or at the end of the mortgage term (to be 10–25 years), the borrower would hand back the original 20% stake plus 40% of any uplift in the property’s value.

If the property were to fall in price, the borrower would hand back the original 20% stake, but Castle Trust would contribute 20% of the loss in value.

Thus, a £200,000 house purchase could be funded with a 25% deposit (£50,000), a 20% Partnership Mortgage (£40,000); and a 55% traditional primary mortgage (£110,000). It is sold five years later.

If the house rises in value by 10% to £220,000, then the Partnership Mortgage is repaid for £48,000 (initial £40,000 plus 40% of £20,000).

If the house falls in value by 10% to £180,000 then the Partnership Mortgage is repaid for £36,000 (initial £40,000 less 20% of £20,000).

So, what do people think of the idea? “We have done regular market research, and words such as innovative, exciting, new and accessible are words that come back to us,” said Guerin. “People also view the HousSAs as offering a good alternative investment vehicle.”

Does the word ‘complicated’ ever also come back? “Well, we do take on board all the feedback we get,” he said.

“Our market research also shows that the Partnership Mortgage would be attractive to about half of home-buyers – for example, people who want to reduce their monthly mortgage payments because they want to put their children through private education, or go on regular holidays. And also to people who do not want to move twice, because a Partnership Mortgage will allow them to buy the type of property they eventually aspire to.”

Does he not think it risky, though, that people having to sell up because of one of the four Ds (death, divorce, debt and downsizing) could find themselves having to hand over large sums of money at a time when they might not be in the best financial health?

“The Partnership Mortgage won’t be for everyone, and we have certainly given a lot of thought as to the outcomes you mention,” Guerin said.

“We will also make people think about how they would fund the repayments if, for example, they had not sold the property.”

Guerin also emphasised that the Partnership Mortgage will not be available directly, but only through advisers.

“This will be an advised sale,” he said. “There will be no direct route, but for advisers it will allow them to consider the possibility that clients might take out one 80% LTV mortgage, or a 60% one with a 20% Partnership Mortgage on top.”

Guerin also made it plain that whilst the major investor is JC Flowers, the US equity firm that bankrolled the Kent Reliance Building Society and is looking for other deals with building societies, there will be no special relationship with, for example, Kent.

“There will be no formal relationship, but obviously, we would welcome the opportunity to work with them,” he said.

And how is the permissions process going? FSA approval is needed for the investment side of the business, while the OFT must approve the Partnership product because it is a second charge.

Guerin gives nothing away but says: “We have had good levels of engagement with the parties.”

Increase in Marketing price reductions

A total of 85,104 properties on the market had their prices cut last month, according to the property search engine Home.

This was 15% more than in June last year.

The website, which takes its data from almost every estate agency website and portal in the UK, also reports that properties are now taking 113 days to sell – 13 days longer than a year ago.

Asking prices have started to show signs of coming down. They are 0.8% lower than a year ago, and 1.1% lower than six months ago.

The website predicts a further slide in asking prices over the rest of this year.

National Auction House increased activity by 71%

National property auctioneer Auction House has seen a dramatic year on year rise in activity, in both the number of lots sold and the amount of money raised during the first six months of 2011.

From January to June, the brand sold 835 properties compared with 488 in the same period last year – a rise of 71%.

During this time, the company raised a total of £77m – up 68% from last year, when the figure stood at just below £46m. The company’s average sales success rate for this year is 80.3%.

Auction House founding director Roger Lake said: “These are spectacular results – especially for a brand which has been in existence for less than five years. They are a clear indicator that our network of regional auction rooms is becoming increasingly successful, and our policy of selling property locally is now really taking hold.

“With an additional five salerooms across the country since last July, we are now well on course to exceed our target of selling 1,500 lots this calendar year.”