|
Mortgage Sales Hit Problems
By: Rich Green
The housing market has been buoyant over the past few years, but mortgage
providers and first-time buyers are both now facing a tough time. Following
announcements from the Bank of England that there has been an overall decline in
the total number of UK home-buyers, and a declaration from the Financial
Ombudsman Service (FOS) that the number of disputes concerning mis-sold mortgage
endowments has now hit record levels, it seems that mortgage lenders are facing
a bleak time. Add to this the results of a new survey, by the Edinburgh
Solicitors Property Centre, which shows potential first-time buyers fear that
they may never get onto the property market, and you start to see a worrying
picture of the housing market emerge.
The problem with the mis-selling of endowment mortgage products has recently
made the headlines in the world of personal finance. The FOS admitted receiving
70,000 new complaints about endowment mortgages, the equivalent of 1,300 a week,
compared to just 300 a week three years ago.
The main grounds for complaint revolve around people who believe that mis-selling
had occurred regarding policies. Many consumers feel that the endowment product
sold to them was unsuitable either because it would lead to financial
short-falls, or because the level of risk involved had not been adequately
explained to them prior to the policy commencing.
The sheer scale and number of complaints has lead to changes in regulations and
the imposition of deadlines for lodging complaints.
"The number [of complaints] we can expect to receive in the current year will
largely be determined by how financial services firms meet the new regulatory
requirements on so-called re-projection letters. Most of these letters will warn
of likely mortgage shortfalls and many will give, for the first time, an
explicit deadline by which any complaint must be lodged.", Walter Merricks,
chief ombudsman.
The situation is no better for first-time buyers either. Forming a significantly
important sector of the house buying market, a recently published study from
GMAC, the financial subsidiary of General Motors, carried out by Professor David
Miles, who was originally commissioned to investigate the mortgage market by
Chancellor Gordon Brown, has found that dramatically fewer first-time buyers
than ever before are currently entering into the housing market.
A report from mortgage lender, Abbey, highlighted that the main concern for
first-time buyers is not a lack of desire to buy their own house, but rather a
fear over whether they feel they can afford to do so. Just over a third of the
potential first-time buyers in the survey, indicated that they wanted to buy a
home within the next year, however only 5% were confident that they would
actually be able to.
These figures are disappointing when viewed against the backdrop of the
initiatives by Gordon Brown to help first-time buyers, through the increase in
the zero rate stamp duty threshold announced during the budget, and the
introduction of shared ownership schemes with purchasers owning between 50% and
75% of their home and paying rent on the remainder.
Recent reductions in the cost of loans for first-time buyers has also occurred,
and many experts believe that the base rate may fall further, creating a spark
for further reductions in the cost of monthly mortgage payments. These should
all be seen as good news, but new buyers still do not appear to be convinced
that now is the right time to buy.
“There are other important influences affecting this group other than the
straight affordability issue”, GMAC’s, executive chairman, Stephen Knight,
reported, “Buying property is seen as ‘settling down’ among 71% of those
questioned….More than half of the people studied felt comfortable with delaying
buying a property until they are over 30. This matches with the current average
age of a first-time buyer, 34.” Stephen Knight also stated that an increasing
problem for those who go on to higher education is that, “many graduates,
especially those who leave college with large student debts, are unwilling to
take on additional financial commitments.”
According to research from Moneynet, first time buyers during May were looking
for an average mortgage amount of £135,966 for an average property value of
£205,284 on an average salary of £39,027. With the average single UK salary
around £24-25k, current house purchases are therefore generally requiring the
combined funds available from dual incomes, combined with many young families
being worried about job security, Stephen Knight believes there are clearly
social and financial issues that need to be addressed.
The greatest worry for a quarter of would-be buyers according to the Edinburgh
Solicitors Property Centre is that they feel that if they don’t get on to the
property ladder soon, they never will.
References:
Moneynet ( http://www.moneynet.co.uk/mortgage-research/index.shtml )
Edinburgh Solicitors Property Centre (http://www.espc.co.uk/)
GMAC (http://www.gmacfs.com/)
Sunday Herald (http://www.sundayherald.com)
Released by http://www.bigmouthmedia.com
About the Author:
Bigmouthmedia is the European leader in search engine marketing. The Edinburgh
based company has offices in London and Madrid. Clients include Sony
PlayStation, Bank of Scotland, Marks and Spencer, British Airways, Sony
Ericsson, King Sturge, Laura Ashley and MTV. E-mail: info@bigmouthmedia.com
Website: www.bigmouthmedia.com |
