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Mortgages round-up 2012: MMR and interest-only fears dominate market

UK houses

While 2012 has sadly not seen the UK mortgage market finally get back on its feet and show healthy growth again, this year certainly hasn’t been a dull one.

Here is a round-up of this year’s biggest mortgage stories.


The MMR hit the headlines with the final consultation paper proposing that lenders would be able to waive affordability rules to help those unable to remortgage or move house because of strict criteria, but the borrowers must not have had any arrears in the last 12 months, leaving a third of sub-prime borrowers without help.


Santander shocked the mortgage sector by deciding to cap interest-only lending at 50 per cent LTV and take a zero-tolerance approach to any adverse credit history from borrowers, sparking fears that other lenders would follow suit.


The Government launched the NewBuy scheme in which lenders offer 95 per cent LTV on new-build properties against a mortgage indemnity guarantee funded jointly by builders and the Government up to 9 per cent of the property value.

Mortgage complaints rose by 38 per cent in the second half of 2011, according to data from the Financial Ombudsman Service.

This sparked the suggestion that claims firms were targeting interest-only borrowers, leading to the hike in complaints.

Interest-only took another hit when the FSA said lenders were sitting on an “interest-only time-bomb”.

It claimed there was nothing it could do to help the large number of borrowers in their late 50s who have no repayment plan in place for their interest-only mortgage.


The UK fell back into recession after a 0.2 per cent drop in GDP, according to the Office of National Statistics.

Signs appeared that mortgage lending may slump after figures from the Bank of England showed lending fell 12 per cent in February.

Nationwide, Lloyds and BM Solutions announced they were cutting proc fees by 0.02 per cent.

BBA chief executive Angela Knight announced she was stepping down in the summer after five years in the position.


The interest-only market looked nervous when the Co-op axed its interest-only mortgage, blaming lack of demand and the MMR for its decision.

Other lenders were expected to follow suit despite the FSA saying it did not intend to ban interest-only.

Abbey for Intermediaries notified around 140 advisers they would no longer be able to use its fast-track facility after a review of its business performance, sparking rumours that Abbey removed these advisers from the service because they had failed to provide evidence of clients’ incomes.

Soon after, more than 100 brokers opted out of using this facility.

Figures from the Home Builder Federation showed 400 properties had been reserved throughout the NewBuy scheme since it began in March. Santander announced it was joining the scheme.


M&S announced it was launching a mortgage offering through new venture, M&S Bank.

The Ministry of Justice warned claims management firms that action will be taken against them if they do not deal with complaints correctly.


The Building Societies Association revealed gross lending had risen by 40 per cent in the first five months of 2012, compared to the same period in 2011.

The CML’s lending figures for May also revealed house purchase loans had risen by 24 per cent over the course of the year.

It came to light that taking out a short-term payday loan could disqualify an applicant from obtaining a mortgage.

Mortgage lender GE Money said it would not consider applicants who have taken out a payday loan over the previous three months.


The Government launched the Funding for Lending scheme. It is hoped the scheme will provide a massive boost to the housing market, and will make it easier for first-time buyers to get onto the property ladder.

Tesco Bank broke into the mortgage market, offering two, three and five year fixed-rate mortgages and a two-year tracker up to a maximum LTV of 80 per cent. The Post Office also announced it will start offering mortgages in its branches in a bid to rival high street lenders.

Barclays announced it was appointing Sir David Walker as chairman, to replace Marcus Agius, after Barclays was fined more that £290m in June by UK and US regulators for manipulating Libor rates.


Figures from the Building Societies Association showed gross lending from building societies increased by 44 per cent year-on-year in July.

Mortgages for first-time buyers rose by 53 per cent in the £120,000 to £250,000 price band between Q2 of 2011 and Q1 of 2012, according to figures from the FSA. Fixed-term mortgages were most popular, accounting for 62.5 per cent of sales.

Bridging lender Tuita Plc and one of its primary funders Connaught Asset Management entered administration. Tuita made a pre-tax loss of £37.8m in the 18 months to September 2011.


The final rules of the MMR were published, with the FSA officially dropping its previous requirement that affordability should be assessed on a maximum 25-year term.

Nationwide announced it would stop providing interest-only mortgages completely and the Royal Bank of Scotland announced it would no longer accept non-advised interest-only mortgages.

After ING Direct UK announced it was leaving the UK banking sector in August, Barclays bought its £10.9bn deposit book and £5.6bn mortgage book.

The deal, which is expected to be completed in the second quarter of 2013, will result in around 750 ING Direct employees and 1.5 million customers transferring to Barclays.

The FSA fined the Bank of Scotland £4.2m for system failures which resulted in the bank holding inaccurate mortgage records for 250,000 of its customers.


Another 17 lenders signed up to the Funding for Lending Scheme, taking the total number of participants to 30. Gross mortgage lending is predicted to hit £144bn for 2012 because of the scheme.

The Council of Mortgage Lenders chairman Martin Van Der Heijden hit out at “hidden procuration fees” at the CML’s annual conference, saying they distort consumer choice. This sparked outrage among brokers.


FSA mortgage lending data revealed new mortgage advances increased 7 per cent in Q3 to £40bn, up from £37bn in Q2.

Google relaunched its UK mortgage comparison service in a deal with Avelo Trigold, which will provide the market mortgage data.

Google will refer users who want access to an intermediary-only product to its panel of 10 brokers.


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