Average prices up £1,384 in January, setting a new record high

LSL Property / Acadata England & Wales HPI 

  • Monthly sales set to reach 73,000 – the highest in a January since 2007
  • Sales only 4% below January average in the decade before the credit crunch
  • 90% of Unitary Local Authorities now experiencing house price growth

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 David Newnes, director of Reeds Rains and Your Move estate agents, owned by LSL Property Services plc, comments: “The UK housing market is roaring further back to life in 2014 as the recovery weighs in across the board.  Prices are now up 5.2% annually, driving the price tag for the average home to a new high. Mostly this is due to much increased activity, with increased demand for property buoyed by low interest rates and Help to Buy, combined with hot competition for homes. This boost in sales has seen an air of optimism encapsulate the market. While 2013 was a turning point in the recovery, 2014 is set to be a watershed year if the next few months continue in the same vein.

“Last month saw the largest rise in sales over the past year, up 67% annually, with transaction levels crucially only 4% below the January average seen in the decade before the credit crunch. This astounding turnaround can largely be pinned down to the resurgence of the first-time buyer. The wide range of attractive mortgage deals on offer, cheaper rates and wider product choice has been pivotal. Such rises in new buyers has spurred on activity further up the ladder and inspired movement among second steppers, which will prove vital in sustaining a healthy rate of sales activity.

“The recovery has now been rolled out far and wide, with the good news coming in from more and more Your Move and Reeds Rains branches up and down the country. Price rises have now spread to 90% of unitary local authorities – the greatest number since August 2010. With mortgages still historically cheap and interest rates set to remain stable for the time being, we’ll continue to see new buyers will rush to the market nationwide. However, even so, price growth and sales levels are still behind their pre-crisis peaks so we’re still some way from the ill-fated ‘bubble zone’.

“Regionally, we’re seeing a ripple effect emerging from London. Heat from the capital is emanating out further with traditional hotspots being the first to reap the benefits of recovery; particularly southern England and East Anglia before moving north through the Midlands. Although we’re still seeing a North-South divide, this is gradually being eroded. The West Midlands has this month broken the mould as growth has surged past the rate seen in the South West region, with Reeds Rains branches across the region reporting a large jump in prices in January compared to the preceding month.

“With greater economic prosperity, confidence between banks and lenders has been cemented further which will no doubt fuel the engine of recovery in the months ahead. While similarly first-time buyers are set to swim further across the sea of adversity to secure a home. But it is crucial both aren’t scuppered and that the Government’s housing plans come to fore with a continued focus on supply. This will ensure the recovery reaches the finish line and a generation doesn’t get priced out of the market”. 


£2 Billion Lending Record for Bridging Industry

  • Industry consolidates expansion with gross bridging lending of £2 billion in 2013
  • Annual lending growth is driven by extra projects, with the total number of loans up by a third
  • Bridging interest rates reach record lows, averaging 1.11% over two months to 1st January

Gross bridging lending totalled £2.0 billion in the twelve months to 1st January, up 3.3% from the annual figure in November 2013.

This brings annual growth in gross bridging lending to 27% – up from £1.57 billion in gross bridging lending in 2012.

In the two month period from 1st November to 1st January 2014, industry gross bridging lending was £419 million, up 5.5% from £397 million in the previous two months.

If lending continued at this rate for a year, gross lending in the next twelve months would be £2.51 billion per year.

Duncan Kreeger comments: “Economic progress feels more solid by the week, and it’s branching out across every area of business. By securing vital projects against property, firms and individuals stand to make the most from a year of great opportunity.

“Bridging has grown up from the industry it once was, and it’s still evolving in 2014. Lenders are expanding and opening their doors to different types of borrower. An economy on the move needs rapid finance that can really get projects started – and short-term secured lending is moving to fill that gap.”

Trends in the Bridging Industry

The most significant factor powering the expansion of gross lending is growth in the number of deals agreed.

Industry loan volumes during the two months ending 1st January increased by 10.8% compared to the previous two month period. This brings loan volumes for the whole of 2013 to levels one third (33%) higher than the preceding twelve months.

Meanwhile, the average value of a bridging loan was largely static. The average loan is now worth £459,000, representing a slight drop of 1.4% from the two months ending 1st November.

On an annual basis, loans in 2013 were larger than the previous twelve months, in line with the long term trend. For the last twelve months as a whole, loans averaged £430,000, or 5.2% more than the average loan in 2012.

Duncan Kreeger continues: “Just a few years ago the average bridging loan was worth half what it is now. Since then, the biggest transformation has been a growing interest from bigger property developers, professional investors and small businesses looking for more significant funds.

“The last few months have seen growth focused on volumes as enquiries are coming in thick and fast. But the long-term trend in terms of loan sizes is also moving upwards. Multi-million pound deals aren’t uncommon anymore, and as 2014 unfolds, even the most ambitious ideas are becoming ever more possible.”

Loan to Value Ratios

Loan-to-value ratios across the bridging industry have risen by almost one percentage point in recent months. In the two months to 1st January the average LTV was 48.1%, or 0.9 percentage points higher than LTVs of 47.2% in the previous two month period to 1st November.

On an annual basis loan to value ratios are still lower than previous highs. The average LTV across all twelve months of 2013 was 46.4% – down from 48.0% in 2012.

Duncan Kreeger comments: “Proper underwriting and a “safety first” approach have always been cornerstones of the best bridging lenders. Higher LTVs are completely consistent with that principle, but as properties grow in value more gearing is not always necessary.

“There is certainly space to lend at higher loan ratios this year, and the industry definitely has capacity to fund bigger loans where needed. Just as business and investment opportunities are opening up, the property market is putting the pedal to the floor. Alongside rates that look set to stay low for some time, slightly higher LTVs could mean more projects will have access to the finance they deserve.”

Bridging Interest Rates

As a whole, 2013 witnessed the lowest interest rates on record for the bridging industry, averaging just 1.19% across the entire year. This compares to 1.37% in 2012 and an average interest rate of 1.55% in 2010, the first year of the West One Bridging Index.

On bi-monthly basis, rates have also fallen to a record low. In the final two months of 2013, bridging loans cost on average 1.11% per month, down from 1.22% in the two months ending 1st November.

By comparison with other asset classes, potential returns for those funding bridging loans remain several times the total return of mainstream investment classes. Monthly product rates currently stand at 4.5 times those of 10 year government bonds, with a monthly spread of 0.87 percentage points.

Mark Abrahams, CEO of West One Loans, concludes: “Nearly seven years on from the financial crisis, markets are still shaking with volatility.

“Equities of all kinds are far too risky to form a large portion of most investors’ portfolios, and most fixed income products are set for years of trauma as central banks begin to wind up artificial bond-buying programmes like quantitative easing.

“As mainstream lenders already feel the first withdrawal symptoms from artificial stimulus and special measures, money from normal investors will be more in demand in 2014. And from a lending perspective, that will also be a serious advantage for privately funded lenders.”

IMLA’s latest Intermediary Lending Outlook

Pace of market growth takes mortgage lenders and brokers by surprise – but hopes emerge of a fuller sustainable recovery

Intermediary lenders and brokers see no cause for intervention to limit growth

Number of brokers struggling to help prime and near-prime borrowers halves in the last year

Wider causes of application failure show prudent approach by lenders

Broker-lender relationships improve as market returns to growth

Almost one in three brokers expect more than 10% growth in first-time buyer volumes

Market growth in the second half of 2013 surprised a majority of intermediary mortgage lenders and brokers but stops short of needing government intervention, according to the latest Intermediary Lending Outlook from IMLA (the Intermediary Mortgage Lenders Association).

Almost nine in ten (86%) lenders and 60% of brokers agree that growth was faster than expected between July and December. However, most lenders (71%) and brokers (74%) feel this upward trend will not require the government to intervene during 2014 to cool the pace of growth. A further 21% of lenders and 11% of brokers are unsure.

Instead, 69% of brokers see current growth as just the beginning of a fuller recovery while another 12% feel this could be on the cards. Lenders are slightly more cautious: 43% expect a fuller recovery while 50% feel this may occur.

Confidence reflected in growing ability to source mortgages for clients

Confidence has been transformed among mortgage brokers in the last year: 90% feel market conditions are currently improving, compared with just 37% in January 2013. Just 2% saw improvements as significant twelve months ago, yet 36% now take this view.

Lenders remain unanimous that the market is improving, as was the case in July. A growing number (67%) see current improvements as ‘significant’ (compared with 63% – Jul 2013).

This confidence is reflected in brokers’ ability to source mortgages for their clients. Just 26% were unable to source a mortgage for a prime borrower in Q4 2013, with more than twice as many (63%) having experienced this problem in Q4 2012. The same is true for near-prime borrowers: 37% of brokers failed to source a mortgage for this type of client in Q4 2013 compared with 67% in Q4 2012.

Growing numbers report improving market conditions Jan 14 Jul 13 Jan 13 Jul 12 Jan 12

Feel market conditions are improving

90% 85% 37% 14% 27%

Feel conditions are improving significantly*

36% 20% 2%

Unable to help a prime borrower in the last quarter

26% 37% 63% 64% 54%

Unable to help a near-prime borrower in the last quarter

37% 46% 67% 69% 65%

Feel market conditions are improving

100% 100%

Feel market conditions are improving significantly*

67% 63%

*The % who feel improvements are significant are counted in the overall % who feel conditions are improving

Prudent lenders keep borrowers in check

Almost nine in ten brokers (88%) report that successful applications stayed the same or improved in the second half of 2013.  But despite wider availability of mortgages and greater volumes of lending, more brokers are experiencing application failure as activity levels grow.

Faced with growing consumer interest, the trend suggests lenders are keeping a close eye on affordability as applications rise¹ and staying focused on lending responsibly to those who can afford it. Growth of lending in the high loan to value (LTV) bracket means limited deposits are now the fourth most common cause of failure, having been third in July, while existing debt has risen to third.

Brokers’ views on the most common causes of application failure

Jan ‘14 Jul ‘13

Not fitting a lender’s profile

74% 67%

Existing or historic financial difficulties (e.g. CCJs, arrears or bankruptcy)

54% 52%

Existing debt

51% 36%

Limited deposits

41% 41%

Asking for too much money, relative to the borrower’s income

40% 31%

Not being on an electoral register

19% 18%

Having too many searches on a borrower’s credit report

17% 10%

Administrative errors

13% 9%

Broker-lender relationships improve

More than one in four lenders (29%) increased the number of brokers they worked with in the second half of 2013, with just 7% reducing numbers. More lenders reported a consistent quality of introduced business in the previous six months (79% – Jan 2014 vs. 64% – Jul 2013) – although those experiencing better quality fell from 29% to 21%.

For their part, a growing number of brokers reported consistent service from lenders over the last six months: up from 45% in July 2013 to 50% in January 2014. Those who feel lenders’ service improved also crept up slightly from 11% to 12%.

Better systems for applications and more information on target profiles remain broker’s proprieties for lenders to address. Demand for better systems has grown from 25% to 34% of brokers, with interest in more information on target profiles also rising from 23% to 27%.

First-time buyers will drive growth in 2014

Brokers see the first time buyer market as the biggest growth area during 2014, with 30% expecting business volumes to increase by more than 10%. One in five (20%) expect the same growth among home movers while 18% anticipate more than 10% extra business in buy to let and remortgages.

Growth is expected to be fuelled by standard borrowers: 79% of brokers predict this part of the market will grow in 2014 (including 29% expecting more than 10% extra business). In contrast, 52% of brokers expect the near-prime market will grow but just 7% forecast growth in this segment to be above 10%.

Peter Williams, Executive Director of IMLA, comments:

“It is easy to forget just how low expectations were this time last year, with barely a third of brokers sensing an improvement in the mortgage market and a tiny minority placing any significance on it. A host of factors have contributed to a remarkable turnaround, including better funding markets, government support, consumer confidence and the improving economy.

“A market slump breeds pessimism, which has certainly been the case in the mortgage market since 2007/8, so for growth to return sooner than expected is nothing unusual and no cause for alarm. It is absolutely right for the Treasury, Bank of England and regulators to maintain a watching brief in 2014. But the recovery is yet to bed in fully and issues such as future interest rates continue to prompt widespread debate. Unnecessary tinkering may undermine the long term goal of laying the foundations for a sustainable market that is strong enough to be self-sufficient.

“Improving relations between lenders and brokers are a big plus as new regulations bring about new working relationships from April. Preparations are well underway to keep on serving the growing number of people interested in getting a mortgage. Their chances of doing so are vastly improved compared with this time last year – but lenders are clearly focusing on affordability and are making sure those who get mortgages should be able to sustain repayments through the upturn in interest rates.”

House Purchase Loans hit a Six Year High, but High LTV Lending dips in December


December was the best month for home lending in six years, according to the latest Mortgage Monitor from e.surv, the UK’s largest chartered surveyor.

There were 77,918 loans advanced to homebuyers in December, the highest number since November 2007. It marked a 40% increase in home loans over the past year, a jump of more than 22,000 approvals from 55,501 in December 2012. Compared to November, home loans increased 10% from 70,758. It was the tenth monthly increase in a row and the largest monthly increase in two years.

Despite an increase in total lending, the volume of lending to high LTV borrowers dipped in December. In the final month of 2013 there were 9,038 loans to borrowers with deposits worth 15% or less of the total value of their property, a 5% decrease from 9,493 in November.

However, high LTV lending is still far higher than this time last year. While total lending has increased by 40% over the last 12 months, high LTV lending has increased at an even faster rate, rising by 60% from 5,661 high LTV loans in December 2012. The figures also show there is still a way to go before high LTV lending will come close to pre-recession levels, with four times as many monthly high LTV loans before the recession, suggesting lending to borrowers with smaller deposits could still be ramped up significantly.

Richard Sexton, director of e.surv chartered surveyors, explains: “There is still a long road to travel before the mortgage market is fully recovered from the hangover of the financial crisis. But the recovery is quickening, and the end is beginning to appear on the horizon. High LTV lending has exploded in the past 12 months, and it is now far easier to take out a mortgage with a smaller deposit saved. There has been something of a festive dip in high LTV lending in the last month, likely to be the result of lower equity borrowers paying for Christmas and delaying their move until the New Year. High LTV lending should continue its recovery in the coming months, but it’s important that Help to Buy remains in place to help support borrowers in building a deposit, enabling them to access better rates, and cheaper deals.”


2013 has been something of a tale of two halves, with the recovery in lending stepping into a new gear in the second half of 2013. House purchase lending increased just 6% in H1 2013, going on to increase by 32% in H2 2013. The recovery in high LTV lending was more evenly spread throughout the year. High LTV lending increased 26% in H1 2013, and a further 27% in H2 2013.

Richard Sexton, director of e.surv chartered surveyors, explains: “The mortgage market had a bumpy beginning to 2013, as fears of a triple-dip recession reigned supreme, and banks were cautious about lending. But while the first half of the year witnessed a moderate uptick in lending, with the seeds of the economic recovery beginning to sprout, the second half of 2013 saw the mortgage market grow at an electric rate.”

More first-time buyers

The number of loan approvals on properties up to the value of £125,000 has increased by 34% in the last year, with 15,584 loans on properties valued £125,000 or under in December 2013, compared to 11,655 in December 2012. It reflects a pick-up in the market, and an increase in the number of lower equity borrowers choosing to move-home or buy for the first-time.

The number of first-time buyers in November 2013 was 28% higher than in November 2012, according to the latest LSL First Time Buyer Tracker, as mortgage rates fell to 3.93% – the lowest on record. But there are warning signs ahead. The average first-time buyer purchase price rose 11% over the year to November, to £149,404.

Richard Sexton, director of e.surv chartered surveyors, explains: “More high LTV borrowers and first-time buyers are looking to buy property now than any other time post financial-crisis. But they are having to fork out more than ever, as prices are driven up by the intense competition for property. Traditionally, first-time buyers have turned to their parents for help building the cash for a deposit – a deposit that is growing larger as prices rise. But inflation has eaten away at many parent’s cash reserves, and this well is beginning to dry up. In order to keep the market accessible for everybody, house building must be ramped up, to prevent the challenge of saving for a deposit form becoming even more difficult.”

LSL England & Wales HPI:

House prices up 5.2% or £11,920 in 2013 – the highest yearly rise since 2007

  • Average prices rise £1,489 in December to £240,134, a new record for England & Wales
  • West Midlands shows second highest regional price growth after London

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David Newnes, director of LSL Property Services plc, owner of Your Move and Reeds Rains estate agents, comments: “As we step into 2014, the recovery of the property market shows no sign of slowing down, with buyer demand growing swiftly and competition rising. Average prices reached a new record high in December after a yearly increase of £11, 920, the highest since 2007, along with a monthly increase of £1,489. Without doubt, the market is moving full steam ahead towards widespread recovery. However we’re certainly not in the bubble zone here, with price growth and sales both still some way off their pre-crisis peaks.

“Momentum is sweeping across the board with new record high house prices in areas beyond the capital, ranging from the West Midlands to East Anglia. Attention is moving away from the north south divide and other regions are stepping out of the shadow of London’s more buoyant property market. Now the universal recovery is really taking flight. For the fourth successive month all ten regions in England & Wales witnessed positive price rises over the past twelve months.

“The coming year looks bright for the UK market thanks to the government’s schemes and record low interest rates. Cheaper mortgages, along with an easing of availability of high LTV mortgages and wider product choices to consumers, have made life drastically easier for new buyers looking to get a foot up on the property ladder. The rise in prices is matched by an impressive boost in sales with a 34% increase in sales since December 2012, which is keeping confidence levels up. There are scores of first-time buyers moving towards the market at lightning pace to explore the raft of attractive mortgage deals on offer.

“Record low mortgage rates combined with the boost in activity from first time buyers at the bottom end of the market, has unlocked chains higher up. The rise in activity among second steppers in recent months, with 16% of home movers taking out mortgages compared to a year ago, suggests sales growth will continue at a healthy pace.

“On closer inspection by regions, East Anglia and the North West saw the greatest rise in sales over the past year, over 26%, but London ranked as the third lowest, despite being the area with the largest rise in prices. This shows the underlying issue that many first-time buyers are unable to afford to live in the capital, as properties are moving into a league of their own. This is not helped by growing demand from domestic and overseas buyers left unmatched due to the gross dearth of housing supply in London.

“The departure of the Funding for Lending scheme, and the arrival of the new mortgage market rules in April, might have a slowing effect further into 2014. However the Help to Buy scheme will become even more pivotal in the coming months and the Government’s ability to stimulate housing development will be crucial to address the chronic shortage of housing supply.”

LMS: Remortgagers taking out record amounts of equity in November

Customers releasing more cash in the run up to Christmas

  • November remortgage lending rose to £4.22bn, up 0.4% on October’s £4.20bn. November’s figure is also 24.1% higher than this time last year.
  • Total gross mortgage lending fell to £17.0bn; remortgaging now accounts for 25% of the total market.
  • Those remortgaging are each taking out an average of £26,498 in extra equity (above the value of the redeeming loan). This figure is not only 22.8% higher than the previous month and 33.5% higher than this time last year – but it is in fact the highest figure on record.
  • This figure implies the total amount of equity withdrawn by remortgaging in November to be £741.1m.

LMS figures reveal that monthly gross remortgage lending increased by £18m in November to £4.22bn. This is up 0.4% on October’s £4.20bn reported by the Council for Mortgage Lenders (CML) last week, and 24.1% higher than this time last year.

The CML has also reported that total gross mortgage lending fell to £17.0bn in November. As a result, remortgages now represent 25% of the total market.

LMS estimates that the total number of remortgage loans in November dropped to 27,968, compared with 28,300 in October. However, despite this, the number of remortgage customers in November is still 5.9% higher than this time last year (26,400).

The average remortgage loan amount has risen slightly (by 1.0%) over the past month and now stands at £150,822. This figure is also 8.8% higher than this time last year.

Commenting on the latest figures, Andy Knee, Chief Executive of LMS says:

“While the CML reported total gross mortgage lending to be down slightly over the past month, the remortgage market has resisted the seasonal dip and is up 0.4% on October’s figure.

“In November, remortgage lending continued to climb as savvy customers flock to the array of competitive rates on offer. Our latest customer survey suggests that more than a third (35%) were able to reduce their monthly payments by up to £500*.

“Last month remortgage customers released more cash than ever before, over £26,400, which will most likely be used to fund a festive spending spree. Looking ahead into the New Year, we are likely to see activity levels continue to rise, although the introduction of the Mortgage Market Review (MMR) in the spring may prove to be something of a rumble strip.”

IMLA votes for continuity with unanimous board re-election for 2014

The Intermediary Mortgage Lenders Association (IMLA) has announced the full re-election of its current board of directors to serve in 2014. The vote of confidence concludes a year of growth for the trade association, which represents the interests and views of lenders in the intermediary mortgage market.

David Finlay, Barclays managing director of intermediaries, will serve a second year as the first IMLA chairman from a mainstream retail bank. Charles Haresnape, Aldermore managing director of residential mortgages, retains the role of deputy chair.

John Heron, managing director of Paragon Mortgages, Richard Tugwell, director of intermediary sales at Virgin Money, and Kevin Purvey, head of intermediary sales at Coventry Building Society will also continue their roles as IMLA directors following a unanimous vote.

The election result means IMLA will continue to be led by a diverse mix of lenders in 2014, bringing together the mainstream retail banking sector, emerging ‘challenger’ brands, the building society sector and specialist lenders. IMLA has also added six associate members during 2013 to the twenty lenders within its ranks.

Members’ vote for continuity reflects the momentum IMLA has built in 2013, fuelled by the publication of its report, Rebalancing the housing and mortgage market – critical issues, and its hosting of the inaugural Great Mortgage Debate in Westminster. IMLA has been vocal in calling for a long term government strategy for the mortgage market to replace short-term interventions like the Funding for Lending Scheme (FLS) and Help to Buy, along with greater effort to address the balance between housing supply and demand.

David Finlay, Chairman of IMLA commented:

“I speak for each of the re-elected board by thanking IMLA members for their contributions this year and for offering the chance to continue championing the cause of intermediary lending into 2014. This vote represents a resounding show of confidence in IMLA’s current direction and the vital role it has to play in address the key issues that are emerging as the market resumes its growth.

“The return of consumer confidence promises to be an important legacy of 2013, but there is still a pressing need a longer term strategy. The market has changed dramatically in the last twelve months, but there is a long way to go to restore full health. Pressing decisions need to be made to protect the future balance of funding, regulation, house building and lending activity.

Peter Williams, Executive Director of IMLA, continued:

“A continuing focus on quality and professionalism will put the intermediary channel in pole position to support the upward trajectory of the market. With the Mortgage Market Review implementation and other challenges ahead, IMLA will continue to draw on the expert views of its diverse membership, which includes some of the most experienced figures in our industry.

“Working alongside our fellow trade bodies, we are committed to regular dialogue with government and regulators – both in the UK and in Europe – to ensure the path that emerges for both mortgage and housing markets steers us towards long term sustainability.”