January 2012
31st January, 2012
Twice as many mortgage holders save rather than pay down their debt: First Direct
Despite recent research showing that overpaying on a mortgage offers better longer term rewards than saving, twice as many mortgage holders save regularly rather than pay down their debt according to new research from online bank first direct.
A survey of 1,022 UK mortgage holders found that 42% are saving regularly - double the proportion that regularly overpay on their mortgage (21%).
One reason for this could be a widespread lack of awareness among mortgage holders on the current details of their loan. Almost a third (31%) don't know the interest rate on their mortgage, 43% don't know the total cost of their mortgage including interest, and a quarter do not know whether or not they are able to overpay on their mortgage.
The top things mortgage holders are unaware of
• The total cost of their mortgage including interest (43%)
• The over payment limit on their mortgage (42%)
• The interest rate on their mortgage (31%)
• Whether or not they are allowed to overpay on their mortgage (25%)
• The amount outstanding on their mortgage (15%)
Another possible explanation is that people value the flexibility of a savings account and are reluctant to pay down mortgage debt in uncertain times as they may need access to their money in unforeseen circumstances.
While in reality, twice as many mortgage holders pay into a savings account as overpay their borrowing, when asked hypothetically how they would use any spare income, the most popular answer was overpaying their mortgage (48%), outstripping paying into savings (42%) and paying off credit card debt (33%).
Offsetting - the best of both worlds
Research by the direct bank has found that by offsetting their savings against their mortgage debt, the average mortgage holder could reduce their mortgage payments by £28.25 per month while retaining access to their savings.
Richard Tolchard, Senior Mortgage Manager at first direct, commented:
"People continue to try to put some money to one side and mortgage holders are no different in also wanting to pay down their loan. However, as this study shows, more often than not they choose to feed extra money into a savings account. This is where an offset mortgage can offer the best of both worlds, acting as a savings account and a way to reduce their net borrowing, as the customer keeps the flexibility to access their savings if they need them".
Men More Aware of Mortgages
Men are more aware of every aspect of their mortgage except the amount of overpayment allowed on their mortgage for which they are equal. The biggest knowledge gap between the genders is on the total cost of the mortgage which 63% of men said they know, compared with just 52% of women.
Young people developing good financial habits
Those in the 25-34 age bracket are the most likely to see the value of saving regularly as 86% of them either already do this or are considering it, compared with 62% of the over 55s. The younger age group is also the most likely to occasionally pay into savings (83%) and the older age group the least (66%).
Suggesting again that the 25-34 age group is conscious of money issues, they are the second most likely to overpay on their mortgage (22% compared with 24% of the 45-54 age group). They are also the most likely to be considering overpaying (51%) compared with 35% of the 35-44s, 33% of the 45-54s and 24% of the 55+ age group.
27th January, 2012
BBA reports that December was the strongest month of 2011 for net mortgage lending by banks
Annual growth of 1.5% in the banks' net mortgage lending continues to outstrip annual growth of 0.6% across the whole lending market in November, according to the British Bankers Association (BBA).
BBA statistics director, avid Dooks commented: "December’s £9bn of new mortgages was the strongest month of last year, being 12% higher than in December 2010".
"However, at the same time, the household sector generally is focusing on debt repayment amid inflated household expenses and a continuing air of uncertainty, so we see a reluctance to let net borrowing rise, with people preferring to use their bank account cash for expenditure.
"Business prospects are even more attuned to the state of the economy in the UK and in overseas trading markets, with borrowing intentions for growth or investment plans generally staying on the back-burner.”
23rd January, 2012
Closing months of 2011 saw stronger mortgage lending, says CML
Gross mortgage lending in December was an estimated £11.7 billion, according to the Council of Mortgage Lenders.
This represents a 12% drop from £13.2 billion in November but a 12% rise from December 2010 (£10.5 billion). December was the fifth month in a row of higher year-on-year lending.
Lending totalled an estimated £37.3 billion in the fourth quarter of last year, down from £39.2 billion in the previous quarter but 11% higher than the last three months of 2010 (£33.6 billion).
For 2011 as a whole, estimated lending totalled £140 billion, says the CML, slightly above its annual forecast of £138 billion. This is up 3% from £136 billion in 2010.
CML chief economist Bob Pannell observed:
"The closing months of 2011 saw stronger mortgage lending activity and housing transactions, despite the fact that short term economic prospects are challenging.
"There is a glimmer of light ahead for households in that real incomes could stabilise and perhaps even start rising by the end of the year. But, continuing Eurozone problems mean that mortgage funding prospects are uncertain, so overall UK mortgage market conditions for the year ahead remain difficult to call".
5th January, 2012
Mortgage lending by mutuals grows by almost a quarter in November: BSA
Gross lending by building societies and other mutual societies was £2.5 billion in November, up 24% compared to November 2010 (£2.0 billion), according to the  Building Societies Association.
This was a new high since the BSA started reporting on the current basis in January 2010. Savings balances held by mutuals increased by £0.5 billion in November, compared to an increase of £0.6 billion in November 2010.
Lending
• 24% rise in gross mortgage lending in November, up to £2.5 billion from £2.0 billion in November 2010.
• 16% increase in gross mortgage lending for the first 11 months of 2011 at £21.5 billion (£18.6 billion, January - November 2010).
• £2.1 billion of mortgages were approved in November, up 13% on November 2010 (£1.9 billion).
• 17% rise in mortgage approvals for the first 11 months of 2011 at £21.3 billion (£18.1 billion, January - November 2010).
Savings
• Savings balances increased by £0.5 billion in November 2011, compared to an increase of £0.6 billion in November 2010.
• Excluding interest credited to accounts, mutual deposit takers had net receipts of £0.3 billion in November 2011, compared to a net receipt of £0.4 billion in November 2010.
• In the first 11 months of 2011, savings balances held with mutuals have increased by £3.7 billion, compared to a decrease in balances of £1.3 billion in the same period in 2010.
Commenting, Adrian Coles, Director-General of the Building Societies Association, said:
"Mutuals have shown their resilience in the face of tough market conditions over the past year and have continued to see their new mortgage lending increase. Mutuals lent 16% more from January to November 2011 compared to the same period in 2010, whilst lending across the mortgage market as a whole has remained broadly flat.
The New Year has seen some excellent mortgage products go on sale from mutuals with a return to some offering higher loan to value mortgages. These are encouraging trends against rather discouraging developments in the wider economy.
"2011 has been a difficult year for savers who have faced a substantial squeeze on their incomes from rising living costs, relatively low wage growth and very low interest rates. Yet in recent months mutuals have seen a net inflow into savings accounts as savers look for the security and certainty which equity markets lack. Households may also be delaying big ticket purchases to put money aside for a rainy day".
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