Capital Markets

Mnuchin expected to be Trump’s Treasury secretary

Donald Trump has chosen Steven Mnuchin as his Treasury secretary, US media outlets reported on Tuesday, positioning the former Goldman Sachs banker to be the latest Wall Street veteran to receive a top administration post. Mr Mnuchin chairs both Dune Capital Management and Dune Entertainment Partners and has been a longtime business associate of Mr […]

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Financial system more vulnerable after Trump victory, says BoE

The US election outcome has “reinforced existing vulnerabilities” in the financial system, the Bank of England has warned, adding that the outlook for financial stability in the UK remains challenging. The BoE said on Wednesday that vulnerabilities that were already considered “elevated” have worsened since its last report on financial stability in July, in the […]

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Zoopla wins back customers from online property rival

Zoopla chief executive Alex Chesterman has branded rival OnTheMarket “a failed experiment”, and said that his property site was winning back customers at a record rate. OnTheMarket was set up last year, aiming to compete with Zoopla and Rightmove, the UK’s two biggest property portals. It allowed estate agents to list their properties more cheaply […]

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Hard-hit online lender CAN Capital makes executive changes

The biggest online lender to small businesses in the US has pulled down the shutters and put its top managers on a leave of absence, in the latest blow to an industry grappling with mounting fears over credit quality. Atlanta-based CAN Capital said on Tuesday that it had replaced a trio of senior executives, after […]

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BoE stress tests: all you need to know

The Bank of England has released the results of its latest round of its annual banking stress tests and its semi-annual financial stability report this morning. Used to measure the resilience of a bank’s balance sheet in adverse scenarios, the stress tests measured the impact of a severe slowdown in Chinese growth, a global recession […]

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Categorized | Property

Mortgage data undermine Help To Buy push

Posted on September 30, 2013

David Cameron highlighted the plight of young people struggling to get a foot on the housing ladder as he brought forward the launch this week of the coalition’s Help to Buy mortgage guarantee scheme.

Yet data on Monday showed mortgage approvals at their highest level in more than five years, raising fresh questions over whether government intervention was necessary to spur recovery in the market.

Key figures

Key figuresSales volumes, loans approved and change in lending

    According to Bank of England figures, lenders approved 62,226 mortgages in August, up 30 per cent from a year earlier. Data from other sources suggest mortgages granted to would-be homeowners have increased even more rapidly than that.

    Much of the new lending is going to first-time buyers – precisely the people the prime minister says he wants to help. Figures from the Council of Mortgage Lenders, a trade body for the industry, show loans to first-time buyers rose 41 per cent in the year to July to 25,300. For existing homeowners, the number of loans rose by less than 10 per cent over the same period to 32,000.

    BoE data published this month showed the proportion of mortgages involving riskier forms of lending, with high loan-to-value ratios and high income multiples usually favoured by first-time buyers, is now at its highest level since the second quarter of 2009.

    “What interests me above everything else that’s going on in the housing market at the moment is why we’re seeing such a strong recovery in reported first-time buyers,” says Bob Panell, economist at the CML.

    However, even after the recent pick-up, mortgages to first-time buyers remain well below the levels seen at the peak of the housing boom. Mr Cameron claimed on Sunday that only “people with rich parents to help them” could afford the hefty deposits demanded by lenders.

    He said the coalition was riding to the rescue of those excluded from the market by launching the next phase of Help to Buy three months earlier than planned next week. Under the scheme, the government will provide a partial guarantee to help people secure mortgages on homes valued at up to £600,000 with just a 5 per cent deposit.

    “As prime minister I am not going to stand by while people’s aspirations to get on the housing ladder are being trashed,” he said.

    A Conservative aide yesterday pointed to CML figures showing that the typical first-time buyer needs a deposit of 20 per cent, equivalent to £29,000 for the average loan of £117,000. “Not many young people have easy access to that kind of money,” he said.

    Figures from Hometrack showed that loans granted to first-time buyers are now 31 per cent lower than levels seen at the peak of the boom in 2006. That is less than the fall in lending to existing homeowners, which is down by half, possibly reflecting a decision by many homeowners to stay put during the downturn rather than realising losses on their property. “The aspirational home movers have certainly been suppressed,” said Richard Donnell, director at Hometrack.

    Buy-to-let mortgages are down by 57 per cent, though CML figures suggest there has been some recovery in recent months. Buy-to-let remortgaging has also surged, rising by almost a quarter between June and July.

    Mr Donnell said high rental prices in London, coupled with more availability of mortgages secured with deposits of 10 per cent or less, has helped drive demand from first-time buyers.

    The surge in loans granted to first-time buyers could in part reflect pent-up demand from previous homeowners who sold their property around the time the boom collapsed and have been renting for a few years, waiting for the market to settle. These would-be homeowners are likely to be older – and with larger deposits – than most first-time buyers.

    “Our data capture those who are coming back into home ownership,” Mr Pannell said. “Anecdotally, lots of people have put plans on hold. That the first-time buyer numbers are coming back as strongly as they had done, it wouldn’t surprise me if a larger than usual proportion of those [are previous homeowners].”

    Mr Pannell estimates that, even in more normal times, the numbers of first-time buyers who have previously owned homes is around a fifth.

    Additional reporting by Jim Pickard