The increase in equity release pricing is raising concern with rolling-up debt hitting the property value faster
The Financial Conduct Authority has today (02/04/2020) proposed a range of new measures to support households facing sudden financial hardship as result of the coronavirus, including three-month payment freezes on loans and credit card debt. The package, intended to complement relief already announced by government to support mortgage holders, furloughed staff, renters and the self-employed, also includes pledges to slash interest rates on arranged overdrafts up to 500 pounds to zero, for up to three months. The FCA, which supervises banks and credit providers across Britain also said consumers using any of these temporary measures should not see their credit rating affected. It also said it would ensure all overdraft customers were no worse off on price when compared to prices they were charged before recent overdraft changes came into force.
Nationwide Building Society has brought back its two-year residential tracker mortgages just days after the product was withdrawn from its offering. The mortgages will go live on 25 March, with house purchase and first-time buyer products starting from a rate of 1.39 per cent and remortgages from 1.19 per cent. The products will cover a range of loan to value tiers and come with both £0 and £999 fee options. Henry Jordan, director of mortgages at Nationwide, said the society took the “prudent decision” to consider the impact of the two interest rate cuts on its range. “We are re-introducing two-year trackers to our mortgage range to enable us to offer products with flexibility and no early repayment charges,” he said. Rate reduction Nationwide has also announced it will pass on a further 0.15 per cent rate reduction to existing variable rate borrowers to reflect the cuts made to the Bank of England bank rate. This follows on from the society confirming it would pass on the initial 0.50 per cent reduction to borrowers from 1 April. With the bank rate now at a record low of 0.10 per cent, Nationwide’s base mortgage rate (BMR) and standard mortgage rate (SMR) will reduce by an additional 0.15 per cent to 2.10 per cent and 3.59 per cent respectively, with these new rates coming into effect on 15 April. Borrowers on an existing tracker rate mortgage will also see their rates reduce by a further 0.15 per cent. Jordan added: “With a second cut in interest rates in just over a week, it is important that borrowers have clarity about what this second change means for them and the future interest and payments on their mortgages. “By passing on this latest rate reduction in full, from 15 April, we hope to minimise mortgage costs for our members during this difficult period.” Earlier, the society closed its dedicated broker support line as a result of government advice surrounding coronavirus. Jordan added: “While we continue to work hard with valuation and conveyancing partners to progress applications, we ask members and brokers to bear with us during what is an unprecedented period.”
Following chancellor Rishi Sunak’s announcement that mortgage lenders would offer a three month holiday on repayments, the bank has confirmed it will offer other rescue measures, as well at the 90 day break, depending on the borrowers’ needs. The bank said it would consider switching borrowers from capital repayment to interest-only for up to 12 months. Further measures to help borrowers include an extension of the mortgage term to lower payments, and the availability of short and long term repayment plans for missed mortgage payments. Borrowers who think they will face financial difficulty are being told to contact the bank to speak to one of its specialist support teams to discuss their options. A Barclays spokesperson said: “As a responsible lender, it is crucial that we offer the right support to our customers at this time. “We have therefore decided to offer customers who are potentially facing financial difficulty, a number of options to support them through this time.” Before the chancellor’s address to the nation yesterday evening, Mortgage Solutions reported Lloyds Banking Group had pledged not to charge borrowers fees on missed mortgage payments. That bank, along with NatWest, Nationwide and Barclays, have all confirmed taking a payment holiday will not leave a black mark on borrowers’ credit profiles.
This was below than 2018’s annual increase of 3.3 per cent, and weaker than the 2.6 per cent growth seen in 2013. All regions saw a drop in growth; England’s prices increased one per cent compared to 2018’s three per cent and prices in Scotland grew 1.8 per cent compared to 4.6 per cent the year before. In Wales, a four per cent growth was seen, down from 2018’s 4.8 per cent and Northern Ireland saw house prices rise by 3.5 per cent. This was a slowdown from the region’s 4.6 per cent rise in 2018. Local changes Locally, the strongest growth was seen in North Devon, where the average price of a house rose 8.9 per cent to £247,590. Three of the top five local areas to see strong growth were in Wales. Land Registry attributed this to the removal of the Severn Bridge tolls making it more affordable for those who work in Bristol to live on the Welsh side of the River Severn. The biggest falls occurred in Kensington and Chelsea, where the average house price dropped 7.7 per cent to £1,256,713. Four of the five local areas which saw the weakest growth were in London and the South East. Land Registry said this followed a “general slowdown” in the London property market since mid-2016 and was probably due to the area being “disproportionately affected by regulatory and tax changes”.
• 68% dip into cash savings to plug their income shortfall, 17% use their bank overdraft and 16% borrow on a credit card • A further 25% anticipate that the increase cost of living will push them into the red this year New research from equity release lender, more2life, reveals that more than a third (35%) of over 55s say their expenditure exceeds their income, with a significant majority of these individuals (68%) dipping into their savings to help plug the gap. A further 25% of over 55s say that the increasing cost of living will mean that it is likely that their households will be living beyond their means this year. For those whose spending exceeds their income, 17% say they would use their bank overdraft to bridge the income gap, whilst 16% would choose to borrow using a credit card. At the same time, almost half of over 55s (48%) say they don’t have enough cash savings to cover an unexpected bill of £5,000, highlighting a worrying trend towards financial insecurity in later life. The more2life research also reveals that one in five said they would not be able to cover the cost of an unexpected £5,000 bill by any means, whilst 14% said they would have to consider taking out a loan to do so. Dave Harris, CEO at more2life, comments: “Fewer over 55s are enjoying a financially carefree retirement, a fact that we can in part attribute to smaller pension pots, greater financial responsibilities and longer retirements. While it is natural to want to use your savings to improve your standard of living in later life, being forced to dip into them or borrow to meet day to day living costs is another matter entirely. This research highlights that for some people retirement is far from relaxing and they are one large bill away from real financial hardship.” Indeed, sudden financial needs would encourage many over 55s to borrow, with 12% saying an event such as their boiler breaking down would push them into debt. Meanwhile, one in 10 respondents said that not being able to cover day-to-day expenses would encourage them to borrow, while 8% would borrow to help a family member or partner. Worryingly, this suggests that this cohort has very little financial cushion should anything unexpected occur. The research also reveals that when considering the impact of a 10% cut to their monthly income, nearly half (44%) of over 55s said they would have to cut back their spending, whilst 12% would need to regularly dip into their savings. However, 32% of respondents said that their income would still be enough, even with a 10% reduction of their income. Dave Harris, CEO at more2life, concludes: “With an increased number of over 55s dipping into their savings or using unsecured borrowing just to make ends meet, an unexpected bill can play havoc with their finances. However, we need to encourage people not only to consider all their assets at retirement but also how they might help if they do find themselves struggling. “Solutions like equity release are set to help an increasing number of older homeowners boost their income. In Q3 alone, older homeowners unlocked nearly £11m of property wealth per day to help give them a financial uplift in their retirement. With specialist advice and a host of innovative lending options, equity release can help many retirees to bridge their income gap and give them the financial freedom in retirement that they deserve.”
