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New year bonus for mortgage market

14/03/13

By Ian Barnsley

Mortgage lenders want the Chancellor to do more to help them build on the best start to the year for home loans since 2008.

The latest study of the market by the Council of Mortgage Lenders (CML) has shown an 11 per cent rise in house purchase lending in January compared to the same month last year thanks to an increase in the number of first-time buyers managing to get their feet on the first rung of the property ladder.

But despite the good performance, the CML insists the market is still at a "crucial stage" in its recovery and is calling on George Osborne to introduce measures to help it even more in the Budget next week.

The 38,300 loans provided to homebuyers in January amounted to £5.7 billion in lending and was actually lower than the market's performance in December but higher than the figures for each January since 2008, when 47,800 mortgages were advanced. First-time buyers continued to inspire the upward trend for the third month in a row.

They were responsible for 42 per cent of mortgages approved in January and this suggests that recent measures designed to help people get on the property ladder are now beginning to bear fruit. Around 15,900 mortgages and £2 billion were given to first-timers in the opening month of 2013, 24 per cent more than last January and again the largest total for the month since 2008.

Like last year, people looking to buy their first property are still having to put down deposits of around 20 per cent but they are tending to target cheaper homes, meaning they are borrowing on average 3.20 times their income, slightly more affordable than the December rate of 3.28.

People moving home in January were provided with 22,300 loans to the tune of £3.7 billion, three per cent more than last year and yet another five-year high.

Seasonal factors could not stop the market recording the best start to a year since 2008, according to CML director general Paul Smee and he said members would be looking to do much more to help borrowers to own their own homes or move house in the rest of 2013.

The CML data shows there are now a third more mortgage deals on the market, thanks to the Funding for Lending scheme freeing up more cheap finance. Lenders have more money to offer and they are finding innovative ways to make the money available.

One of these, the Barclays family springboard mortgage, allows those looking to buy their first home to put down a five per cent deposit when their parents take out a savings account alongside the loan.

The Government's NewBuy scheme has seen 3,000 new-builds already snapped up by people putting down another five per cent deposit.

Legal and General's Mortgage Club managing director, Ben Thompson, is looking for the Chancellor's Budget announcement next week to bring more good news for the recovery of the mortgage market.

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More borrowers lie to get mortgage

09/04/13

By Catherine Ball

More people are now lying about their employment history and finances to get a mortgage to buy a home, statistics have shown.

There were nine per cent more cases of mortgage application fraud in 2012 than in 2011, according to Experian. A report by the credit rating firm claimed application fraud, which includes applications for credit cards and savings accounts as well as mortgages, had increased by three per cent and is set to carry on increasing throughout 2013 as household budgets get even tighter.

But banks have tightened up their checks for issuing current accounts to customers and 2012 saw a 25 per cent drop in fraud by consumers wanting to open a day-to-day bank account.

Nick Mothershaw, Experian's UK director of identity and fraud, said it was good news that current account fraud was decreasing as this was often the first port of call for criminals planning to use deception to take out a mortgage, loan or credit card. And he said the decrease was due to financial services providers becoming more vigilant and making improvements to their systems.

In 2011 for every 10,000 mortgage applications, 35 were fraudulent but last year this rose to 38 in every 10,000. This is more than double the 2007 figure when the number of fraudulent mortgage applications was 18 per 10,000.

Nearly 90 per cent of the incidents involving mortgage application fraud involve borrowers telling lies about their employment status, past jobs and credit history. And Experian said people who were middle-aged, skilled and working-class were the most likely to be untruthful to try and get a mortgage deal.

The report described this group of individuals as the "terraced melting pot" and said they were responsible for more than a fifth of mortgage application fraud cases. It predicted the number of dishonest would-be borrowers would rise this year due to stricter terms set by mortgage providers combined with pressure on household incomes.

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Mortgage fraud cases, and insurance.

Nine in 10 mortgage fraud cases involve individuals painting a knowingly false picture of their personal circumstances on an application, Experian says. Photograph: Whisson/Jordan/Corbis
The level of fraud on mortgages and insurance policies has more than doubled since the start of the credit crunch, and the ongoing squeeze on household finances is likely to lead to more cases, a credit reference agency has claimed.
Figures from Experian show that although the total rate of fraud on financial products has fallen since 2007, in certain areas there have been big increases in the number of false applications.
Its data shows that the rate of mortgage fraud increased to 38 cases in every 10,000 applications in 2012, up from 35 the previous year, and more than double the 18 cases per 10,000 recorded in 2007.

Nine in 10 cases involved individuals painting a knowingly false picture of their personal circumstances on an application, with the most common action being an attempt to hide a poor credit history. False statements about the applicant's employment status or financial circumstances also featured.
Experian said mortgage fraud cases were highest among the social group made up of middle-aged, middle-class, and skilled working-class individuals.
Over the same period the number of fraud cases involving insurance policies also increased more than two-fold, from 5.44 in every 10,000 cases in 2007 to 12 in every 10,000 in 2012. In this sector, 86% of frauds involved the person applying for the policy or making a claim.
Across the board, Experian said the group responsible for the most fraudulent applications for financial products in 2012 was a group it classifies as "Terraced melting pot". This group, which represents people in routine urban occupations, was responsible for 21% of first-party fraud cases over the year.
The "Liberal opinion" group, which consists of young professionals and well-educated people, came next accounting for 14% of first-party cases. In total, about 70% of financial services application fraud was down to first parties misrepresenting their circumstances.
Experian said it expected fraudulent applications to continue to rise throughout 2013, driven by the ongoing squeeze on household incomes and benefits, and stricter credit and lending criteria.
"As a result of poor or patchy credit, more and more 'non-professional' fraudsters are clearly attempting to ease their position, misrepresent applications or make exaggerated claims over their income and personal finances," said Nick Mothershaw, UK director of identity and fraud at Experian.
"Mortgages, current accounts, insurance and cards will continue to come under pressure from fraudsters keen to get their hands on cash facilities."

Decline in mortgage approvals

03/04/13

By Dan Machin

Mortgage approvals fell to a five-month low in February, despite recent signs of improvement in the housing market.

There were 51,653 approvals for house purchases, worth a total of £7.7 billion during the month, according to the Bank of England's Money and Credit survey, continuing a decline which began at the beginning of 2013.

This number, which is the lowest total seen since September last year, is significantly down on the 11-month high of more than 55,000 in December.

A number of Government schemes to unblock the flow of credit have recently given the housing market a boost.

For instance, the number of mortgages on the market has increased by around one third since the Funding for Lending scheme was launched in August 2012, giving lenders access to cheap finance in order to help borrowers.

However, mortgage levels are still way below the average of more than 85,000 a month seen for the last 20 years.

In an attempt to boost the market further, the Government has announced plans for a new Help to Buy scheme in its recent Budget, which will help more people to buy a home with just a 5 per cent deposit.

But Howard Archer, chief UK and European economist at IHS Global Insight, said the continued tough state of the economy is likely to weigh down on house prices in the coming months.

"House prices may very well eke out a small gain over 2013 supported by modestly increased activity," he said. "However, it remains hard to see house prices making a decisive move upward in 2013 given the still difficult and uncertain economic environment."

Figures also showed that credit card lending increased by £223 million in February, as Britons turned to their plastic in order to get by.

The rise is on a par with that witnessed in December during the Christmas period, while personal loan and overdraft lending also jumped by £416 million.

Experts claim the increases are in line with recent surges seen in retail sales and could suggest that consumer confidence is lifting slightly, with people a little more prepared to dip into debt than they previously were.

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States declining mortgage settlement money for other uses

In a budget proposed this week California joined more than a dozen countries, which want to fill the gaping deficit, money paid by the largest banks of the nation and to prevent foreclosure, investigations of fraud and blunting of the ill effects of the crisis in the hull. California was awarded over 400 million dollars of banks, as well as Gov. Jerry Brown proposed the use of the majority of this amount to pay the debts of the State.

The money is part of a national settlement valued at 25 billion dollars and over abuses in their processes of mortgage and foreclosure, agreed with five large banks.

The settlement, reached in February after the first year of conferences and intervention by the administration of Obama, is the second largest in history, involving the State final of the settlement of the tobacco industry and represents the first large-scale commitment from banks to provide direct assistance to borrowers.

As part of the settlement the banks agreed to pay the States 2.5 billion dollars, money intended to help homes and mitigate the effects of the increase in foreclosure. But critics complain that this is the only cash, banks have been must pay the other comes in the form of "loans" for the reduction of mortgage bonds and other activities. Even relatively small amount proved too great a temptation for legislators.

Only 27 Member States have devoted all their funds from banks, housing programs, according to a report by the partners of the community of the enterprise, the national affordable housing group. So to about 15 countries have said they will use all or most of the money for other purposes.

In Texas, 125 million dollars go directly into the General Fund. Missouri will use its 40 million dollars to limit cuts in higher education. Indiana is spending more than half their distribution to pay energy bills for families with low incomes, while Virginia will use most of its 67 million dollars to help revenue to local authorities.

Some other States such as California with air-to-air air problems by the housing bust are spending money for something other than the release of the homeowner. Georgia, where home prices are still falling, will use its $ 99 million to attract companies to the State.

"The Manager has decided to use the last money for economic development," says spokesman Nathan deal of Georgia Governor, Republican. "He believes that the best way to prevent foreclosures among honest dwellings are difficult times is to create jobs here in our State."

Andy Schneggenburger, Executive Director of the Atlanta Housing Developers Association of Neighborhood-Based, said the decision showed "a real lack of understanding of the depths of the foreclosure problem."

2.5 billion is intended to be under the control of attention, which negotiated the settlement with five banks – Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and ally. But there is enough room to wiggle in the agreement or in separate periods agreed upon by each State, to give Lawmakers and Governors wide latitude. For example, money shall be regarded as "civil sanctions" earned by the State, and some leaders have argued that States are entitled to money, because the housing crash decimated collections of taxes.

Shaun Donovan, the Secretary of the federal housing, is privately urging civil servants to spend money as intended. "Other uses fail to emphasize the opportunities presented by the transaction to real, concerted relief for homeowners and communities in which they live," he said on Tuesday.

Some Attorneys General met Tycho requests to repurpose of money, while others have protested. Lisa Madigan, democratic Attorney General of Illinois, says it will oppose any efforts to divert the funds. Tom Horne, Arizona Republican Attorney, said he did not agree with the removal of the State to take around half its 97 million dollars, which officials said was needed to close.

But Mr Horne, said he does not oppose the shift because the Governor and legislative authority in budgetary matters. Arizona Center for law in the public interest says it will Sue to stop the Horn of the Mr by transfer of money.

Robbie Brown contributed reporting.

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