Mortgage Market Briefing – September 2019

It was an encouraging month for the mortgage and property markets, with house prices growing slightly, an increase in mortgage lending and greater product choice for homeowners.

House prices in England and Wales rose a modest 0.7% in the last 12 months, according to data from Your Move. The average house price now stands at £300,886 following the rise, with prices also up 0.3% compared to the previous month.

The key London market is also finally showing positive signs, with prices rising 1.1% between June and July. This leaves the average house price at £608,650, 0.7% higher than a year ago.

The fastest annual price growth was seen in Wales, where property prices rose 3.2% in the last 12 months to hit £185,595. This was ahead of the North West, which saw average prices increase by 2.3% to £195,816 during the last year.

Only two of the ten regions surveyed saw house prices fall in the last year. They were the East of England, where prices dropped 0.9% to £331,302, and the South East, which saw a fall of 1.5% compared to last July. The average price in the region is £372,940, putting it second only to London.

Greater choice for borrowers

Encouragingly for first-time buyers and others with smaller deposits, there has been an increasing number of long-term fixes at all loan-to-value levels. The rise in five-year deals has not come at the expense of shorter contracts either, with the number of two-year fixed remaining steady compared to 2014. There are 1,547 two-year loans on the market at present.

This increased choice has helped bring more customers to market, with UK Finance figures showing a healthy rise in mortgage activity in the year to July. It said there were 32,640 new first-time buyer mortgages completed during the month, which represents a 5.8% increase compared to last year.

The number of home mover mortgages has also grown, albeit at a slower rate, rising to 32,710 in the month. This is 1.4% higher than the total recorded in July 2018.

In the remortgage market, the number of new deals completed fell year-on-year. There were 20,760 remortgages where the customer released cash from their home and a further 20,380 like-for-like deals completed. These numbers are down 7.1% and 12.9% respectively, compared to a year ago.

In the buy-to-let market, there were 5,800 completions in the month, up 5.5% versus last year, while remortgage activity grew by 2% to hit 15,100 deals.

The equity release market

The equity release market continues to grow, with new research suggesting that older homeowners are using the product to repay debts. Research by Key Retirement suggested that 30% of equity release users unlocked cash from their home to repay unsecured debts with a further 20% using it to pay off their mortgage.

Debt is becoming an increasing issue for older people, with the average equity release customer now carrying £10,319 in card debt and £14,578 in other loans. In many cases the interest payments on these debts can account for as much as 40% of the person’s monthly state pension.

However, outstanding mortgage debt remains high. As typically no repayments are required before the equity release loan matures, equity release customers can expect to see outstanding balances accrue during the lifetime of the loan.

As well as holding mortgage debt later in life, borrowers are happily fixing their loans for much longer periods, according to Moneyfacts.

The number of five-year fixed rate deals has skyrocketed in the past few years, the data provider found. There are currently 1,542 five-year fixes on the market today, which is almost double the 796 recorded five years ago.

Richard Sexton – Business Development Director, e.surv Chartered Surveyors

Sources:

https://moneyfacts.co.uk/news/mortgages/competition-on-five-year-fixed-rate-mortgages-intensifies/

https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/june2019

https://www.santander.co.uk/uk/infodetail

https://www.ukfinance.org.uk/data-and-research/data/mortgages/lending-trends