Brexit, Shared Ownership & Mortgages

September 2016

Summer holiday time might be over but our Shared Ownership allocated customers are still committing to new homes and mortgages.

Setting aside the usual ‘summer dip’ there is no noticeable drop in HCA affordability tests here at Metro Finance. In fact, we’re experiencing higher volumes than usual at this time of year.
Brexit fears from Shared Ownership buyers appear to be limited to concern over interest rate movement rather than property values declining. The majority thinking that rates may fall further hence on occasion delaying decisions to commit, until further discussion with one of our Advisers.
Mortgage product numbers for Shared Ownership remain high, the number of 95% products is 39% higher than one year ago and overall we have 28% more SO products. Mortgage lenders are committed; the 17 Shared Ownership lenders are hungry for business, some with record low rates.
This is all sounding very positive so far, but let’s not be complacent, we are all very aware that the picture for the UK economy is not yet fully developed.
Additional measures have been put in place here at Metro Finance to safeguard and maximise SO buyer affordability check pass rates. Those measures are here to stay. The measures include extra calls to potential buyers (now 4 attempts) and an increased audit rate of failed HCA tests (now 20% of all fails).
What do we hear from the Mortgage Market?
Nationwide Building Society
The second largest UK lender has pledged to support first-time buyers and regular savers in response to Brexit uncertainty and outlined a five-point action plan. The plan includes low deposit lending, with £10bn earmarked for first-time buyer mortgages, converting to new homes for 100,000 borrowers.
The pledges include safeguarding the rates on its regular savings accounts, Help to Buy ISA and Save to Buy products to accelerate home ownership. The mutual will also establish a Brexit support group with representation from leading consumer bodies.
Nationwide’s chief executive, Joe Garner, said: “As a building society, we exist to help people into a home of their own and to help them manage their money and save for the future. Our mutual model means we’re able to plan and operate over the long term.”
Nationwide’s five-point plan:
  1. Minimising costs for first time buyers
  2. Maintaining low deposit lending
  3. A £10bn a year commitment available to first time buyers
  4. A savers’ support package
  5. A Brexit consumer support panel
British Banker Association (BBA)
Brexit has not hit mortgage-borrowing demand, according to figures from the British Banker’s association.

Gross mortgage borrowing this month is at £12.6bn, up by 6% compared to July 2015. Net mortgage borrowing is also 3% higher than last year.

The Head of Corporate Affairs at Yorkshire Building Society, Tanya Jackson, says: “These figures suggest that people’s desire to own a property largely outweighted any uncertainty caused by the EU referendum in July. That said, the full effects of the vote are unlikely to be seen until a few months after the outcome of the vote was announced, as those buying a home in July are likely to have begun the house buying process before the EU referendum.”
The number of residential property deals fell by 0.9% between June and July, according to new HMRC research. The number of adjusted homeowner deals had fallen 8.3% year-on-year.
The HMRC says the outcome of the European Union referendum in June was to blame for the level of transactions falling.
There were 94,550 provisional seasonally adjusted UK residential property deals in July 2016.
Legal & General Housing Partnerships Director, Stephen Smith, called for calm by saying:
“While there has been a slight fall in transactions this month, we shouldn’t jump to any conclusions and pin the blame entirely on the vote to Brexit. Though some buyers may have held off on purchasing a property ahead of the referendum, it’s important to remember that transactions have remained static for some time now, and that the seasonal lull we typically see over the summer months is also likely to have played a role.”
It’s also worth mentioning that the dip in June/July could also be reflective of the prior rush to complete transactions to avoid stamp duty changes.
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