Fox Davidson Posts Record Month For Lending


Fox Davidson recorded a record month for written business in March. As a company, we arranged over £16 Million pounds of lending for clients. The first quarter of 2017 got off to a slow start but from Mid- January the housing market has been extremely active with plenty of purchase and remortgage activity.

It had been expected that buy to let mortgage lending would decline due to tougher tax rules introduced by HMRC and more stringent lending rules but Buy to let accounted for 45% of all lending in March.

Buy to let remains a massive part of the UK mortgage market. The market is changing and we are seeing more clients buy in the name of a limited company. The property still provides an income and over a medium to long term is generally an appreciating asset. Many of our clients are also making short-term gains through buying, refurbishing and selling.

Gross mortgage lending hit £21.4bn in March, down 19 per cent year-on-year but up 19 percent month-on-month, according to the Council of Mortgage Lenders.

The sharp fall in year-on-year lending was expected, as of March last year saw significant rises in activity as borrowers rushed to beat the second property stamp duty deadline that came into effect from the beginning of April.

Lenders are still trying to entice new customers. In quarter 1 we have seen 5 year fixed rates as low as 1.29% and lenders are generally now all offering free valuations or cash back on their mortgage deals.

House Prices

A severe lack of stock continues to prop up house prices. The latest RICS survey in March states that new buyer enquiries in the UK were reported to be flat for a third successive month in March, and although the picture remains mixed across the UK, the areas with declining buyer interest outweigh those with increasing demand. The strongest growth in new buyer enquiries was seen in Northern Ireland and the South West and, on a bright note for London, buyer interest has been increasing modestly over the last four months.

New instructions to sell fell noticeably with 13% more surveyors seeing a fall in fresh listing rather than a rise over the month.

Stock on estate agents books has consequently dipped to a new record low with branches (on average) now holding only 43 unsold properties.

In their latest City Index of house prices Hometrack reports:

  • City house price growth running at 6.4%, down from 7.8% twelve months ago.
  • Manchester registers the fastest growth of 8.8%, London drops to 10th in growth rankings.
  • Bristol increased 0.4% month on month in March.

In the lettings market, RICS reported that tenant demand continued to rise as 11% more respondents noted an increase (rather than a fall) on a non-seasonally adjusted basis. Even so, demand growth remains more modest than in March 2016. New landlord instructions also remain in negative territory for a sixth straight month, and the imbalance between supply and demand continues to drive rents upwards. Contributors anticipate further growth in rents in virtually all areas over the next twelve months with the exception of the capital, where rents are anticipated to continue to decline over the near term.

Interest Rates

Mortgage Brain, the sourcing system says the cost of the lowest rate five-year fixed mortgage at 2.55% percent at 90 per cent LTV – fell by just 1% since January 2017. A 90% LTV two- and three-year fixed and a 60% LTV five-year fixed are all just 0.2% cheaper than they were three months ago. Mortgage Brain says a slight increase in cost occurred for a 60% LTV three-year fixed rate loan, which rose 1% to 1.79% over the course of 2017. The lowest rate 90% LTV five-year fixed now costs 5% less than it did this time last year, for example, while its 60% LTV counterpart costs 4% less than it did in April 2016. The cost of a 60% LTV three-year fixed and a 60% LTV two-year fixed are both around 4% lower than this time last year. “Following the long period of record lows, however, our short terms analysis can be another sign that was moving towards a period of cost and rate stability or even potential rises.”

When will Bank base rate rise?

Howard Archer, chief UK economist at IHS Global Insight, said: ‘Looking through Easter-related distortions, we expect inflation to continue to trend up to reach 3 per cent by the end of the year and to likely peak around 3.3 per cent early in 2018 as sterling’s weakness continues to feed through.

‘This will be uncomfortable for both consumers and the Bank of England.

‘Consumers are facing a serious squeeze as higher inflation is occurring in tandem with muted earnings growth – and this looks set to bite even harder over the coming months

‘It is evident that the Bank of England has recently become more concerned about the potential inflation overshoot but we still expect interest rates to remain at 0.25% through 2017 and 2018 at least.

‘We suspect that any Bank of England temptation to raise interest rates will be tempered by mounting evidence of a slowing UK economy as consumers rein in their spending and business caution mounts.

‘Likely ongoing muted earnings growth is also seen encouraging the Bank of England to sit tight on interest rates.’

Oliver Kolodseike, the CEBR senior economist, said: ‘The last time the unemployment rate stood at 4.7 percent (in August 2005), total wages grew 4.7 percent and real income growth (adjusted for inflation) was 2.4 per cent.

‘We, therefore, expect the BoE to tolerate higher inflation in the short term and to keep interest rates at their current level until early-2018.’