Fox Davidson Quarter 3 Lending Overview


The CML reports that gross mortgage lending reached £20 Billion in September, slightly up from £19.7 Billion in August. Interestingly the September year on year figure was up 12% which is the 4th month in a row there has been a spike in year on year lending figures.

CML economist Mohammad Jamei comments “Mortgage lending is currently enjoying its best spell since 2008. As we expected, the second half of 2015 has seen a pick-up in activity in the housing market after a slow start to the year. Low inflation, strong wage growth, falling unemployment and competitive mortgage deals are all helping to support housing demand. We expect to see further modest growth towards the end of the year, although affordability pressures are likely to limit gains for home movers and first-time buyers.”

Low rates continue to offer excellent terms for lending on both residential, buy to let and commercial finance. Residential mortgage lenders continue to offer low rates coupled with incentives such as cash back and free property valuations. Santander for example offers a free valuation on both re-mortgage and purchase applications whereas Virgin Money are offering £1,000 cash back on some of their mortgage deals.

The freebies are very welcome but what the market still needs is innovation as many clients still fall foul of lenders criteria. A bank offering some innovation is NatWest which made some big criteria changes in September. The lender will now lend on an interest only basis, something it had not done since the credit crunch.

Here’s an overview of the key criteria: • Must have an acceptable repayment strategy (includes sale of the property) • A single gross annual income of at least £100,000 excluding discretionary bonuses • A maximum loan to value (LTV) of 75%

Buy To Let Mortgage Regulation

As we move towards regulation of buy to let mortgages in March next year lenders will have to move to an affordability based model for lending on some Buy to let scenarios rather than one that purely uses the rental income. Some banks have already changed their lending criteria to lend based on income from the rental property and also the client’s income. This has been especially useful for London property where the rent is insufficient to borrow the sum required but the client has a large income. Many of our London £1m + buy to let mortgages have been agreed on this new model.

Property Development Finance

Property development finance is plentiful with high street commercial banks, challenger banks and privately funded lenders all wanting a piece of the action. For the right deal and for experienced property developers we have secured rates for multi-million pound developments below 6%. For those new to property development there are lenders that will lend at anything from 0.6 to 1.5% per month. It is really good to see this market being serviced by all types of lenders. With the ongoing lack of stock in the housing market creating demand and permitted development rights allowing more property to be built or converted we expect this market to continue to go from strength to strength.

95% Loan To Value Mortgages

Several lenders are now offering 95% loan to value mortgages outside of the Governments Help to buy guarantee schemes. The rates are competitive and illustrates lenders confidence in the market. I don’t think we will be seeing 100% loans although there are a few lenders accepting personal loans as deposit so technically….


Housing reports show house price inflation falling. London continues to grow ahead of the rest of the UK and demand is still far outstripping supply.

Hometrack reports that of the 20 cities they track, 13 have reported slower rate of growth than in Q2. Major cities such as Bristol, Edinburugh & Southapton are closing in on market leaders London, Oxford & Cambridge.

Richard Donell, Director of research at Hometrack comments “It is important not to read too much into one month’s headline results but there are signs that the pace of city level house price growth is likely to continue slowing. There has been a surge of demand since the election in May but weaker mortgage approvals and evidence from survey data suggests less frenetic demand in the final quarter of the year.

“Putting the relative performance of UK cities into wider perspective shows a wide variation in performance from city to city emphasising that there is no single UK housing market – house prices in Belfast prices still remain almost half the level seen in 2007 while those in London are 43% higher. The variation in growth reflects the strength of underlying demand for housing and the health of the local economy with the index throwing light on these localised trends at a granular level.”

Nationwide’s Q3 housing index reports that UK house prices increased 0.5% in September with the annual house price growth increasing slightly from 3.2% in August to 3.8% in September.

Robert Gardner, Nationwide Chief Economist comments “The data in recent months provides some encouragement that the pace of house price increases may be stabilising close to the pace of earnings growth. However, the risk remains that construction activity will lag behind strengthening demand, putting upward pressure on house prices and eventually reducing affordability.

“Indeed, in recent months surveyors have reported historically low levels of properties for sale and increased new buyer enquiries. Therefore it is unsurprising that most surveyors expect a pickup in house price growth in the months ahead.

Looking at their data you can see that UK house price inflation continues to fall from the heights of 11.8% in June 2014 to a low of 3.2% in August before increasing slightly to 3.8% in September 2015. The average UK house is now £195,585.


It’s the big questions isn’t it, when will interest rates rise? Well, with the Bank of England unable to agree on whether the next move should be to cut or increase rates never mind when rates should increase it seems very unlikely to be anytime soon. Interest rates have been at 0.5% since March 2009 and we would expect them to still be at 0.5% in March 2016.

In truth no-one knows when rates will increase so don’t listen to anyone who claims they do know. When it comes to mortgage lending and deciding on interest rates and options such as fixed rate vs tracker rate or 5 years fixed vs 2 years fixed the important thing to remember is to do what is right for you. If you like to budget and are about to buy your family home for the next 10 years then a long term fixed rate might be suitable, however, if you are planning to sell in a few years and move abroad then clearly a short term fixed rate or tracker with no penalties may be more suitable. There is no universal right or wrong thing to do and that is where a good fact find meeting and solid advice from a broker will help you to decide.

What we can say with certainty is that interest rates are at record lows and we expect some attractive interest rates to hit the headlines in the coming weeks and months as lenders try to up their lending volumes to hit annual targets. Take advantage of the low rates as they will not be around forever, the problem is no-one is sure how long forever is!


Many mortgage lenders will be offering cheap headline rates as they try to fulfil lending targets. Applications in q3 2015 will complete in Q1 2016 in time for the end of the fiscal year. If cheap money doesn’t work then criteria will have to loosen up to attract new business which will be most welcome.

We have a close relationship with many property professionals including estate agents and surveyors and some are already reporting a slow-down in activity ahead of the Christmas period. Hometrack’s latest report states that they expect house price inflation to slow in Q4 as seasonal factors kick in.