The Mortgage industry of the United Kingdom has traditionally been dominated by community building, but from 1970 the market share of new mortgage lending held by the building community has declined substantially. Between 1977 and 1987, stocks dropped dramatically from 96% to 66% while banks and other institutions increased from 3% to 36%. Major lenders include building communities, banks, specialized mortgage companies, insurance companies, and pension funds. For four years after the 2008 financial crisis, the UK mutual fund sector provided about 80% of net loans to the housing market. There are currently more than 200 significant separate financial organizations that channel mortgage lending to home buyers in the UK, where Lloyds Bank and the Nationwide Building Society have the largest market share.
Video Mortgage industry of the United Kingdom
Mortgage lenders
Over the years, the market share of new mortgage lending held by the construction community has declined. Between 1977 and 1987, it dropped dramatically from 96% to 66% while banks and other institutions increased from 3% to 36%. The banks and other institutions that made major inroads into the mortgage market during this period were helped by factors such as:
- relative managerial efficiency;
- advanced technology, organizational skills, and marketing skills;
- extensive branch network; and
- the capacity to capitalize on cheaper international sources of funds for loans.
In the early 1990s, UK building societies have managed to slow down considerably if not reverse their market share decline. In 1990, the public held more than 60% of all mortgage loans but took over 75% of the new mortgage market - primarily at the expense of specialized mortgage lending companies. Community building also increased their personal savings market share in the early 1990s at the expense of banks - attracted 51% of this market in 1990 compared to 42% in 1989. One study found that in the five years 1987-1992, the community buildings collectively outperform UK clearing banks on virtually any measure of growth and key performance. The public share of the new mortgage lending market of 75% in 1990-91 was similar to the share level achieved in 1985. Profitability as measured by return on capital was 17.8% for the top 20 communities in 1991, compared to only 8, 5% for four major banks. Finally, the bad debt terms relative to the down payment is only 0.4% for the top 20 people compared to 2.8% for the four banks.
Although the building community then restored a large number of lost mortgage lending businesses to banks, they still only had about two-thirds of the total market in the late 1980s. However, banks and building societies are now increasingly similar in terms of their structure and function. When the national Abbey building society was converted into a bank in 1989, this could be considered a major diversification of building societies in retail banking - or significantly increase the bank's presence in the mortgage housing mortgage market. The research organization of Industrial Systems Research has observed that the trend towards increased integration of the financial services sector has made the comparison and analysis of market share of various types of institutions increasingly problematic. It identifies as a key factor that makes consistently higher levels of growth and consistent performance in some mortgage lenders in the UK over the years:
- the introduction of new technologies, mergers, structural reorganizations and the realization of economies of scale, and generally improve efficiency in production and marketing operations - to the extent that it allows lenders to reduce costs and offer more competitive pricing and innovative loans and savings products ;
- the acceptance of extensive retail savings, and reduced reliance on wholesale markets that are relatively expensive for funds (especially when interest rates are generally maintained at international high levels);
- the level of arrears, property, bad debt, and lower provision than competitors;
- increased flexibility and income from secondary sources and activities as a result of political-legal deregulation; and
- is devoted or concentrated on the traditional core business, mortgage lending and savings deposits that are relatively profitable.
Maps Mortgage industry of the United Kingdom
Mortgage type
The UK mortgage market is one of the most innovative and competitive in the world. There is little intervention on the market by entity-funded countries or countries and almost all loans are funded by joint organizations (community building and credit unions) or specialized lenders (usually banks). Since 1982, when the market was substantially regulated, there was substantial innovation and diversification of strategies used by lenders to attract borrowers. This has led to different types of mortgages.
Because lenders get their funds either from money markets or from deposits, most mortgages go back to the variable level , either the default variable level of the lender or the tracking rate , which will tend to be related to the underlying (or sometimes LIBOR) repo rate of the Bank of England (BoE). Initially they will tend to offer an incentive deal to attract new borrowers. This is possible:
- Fixed rate ; where interest rates remain constant for a certain period of time; usually for 2, 3, 4, 5 or 10 years. Long-term fixed rates (more than 5 years) while available, tend to be more expensive and/or have a heavier repayment cost and are therefore less popular than short-term fixed rates.
- Restricted ; if similar to a fixed rate, the interest rate can not rise above cap but may vary below the limit. Sometimes there is a collar associated with this type of rate that sets the minimum rate. Capped rates are often offered during periods similar to fixed rates, e.g. 2, 3, 4 or 5 years.
- Discount rate ; where there is set margin reduction in standard variable rate (eg 2% discount) for a certain period of time; usually 1 to 5 years. Sometimes discounts are expressed as margins on the basic rate (for example, BoE base rate plus 0.5% for 2 years) and sometimes the rate is stepped on (eg 3% in year 1, 2% in year 2, 1% in third year ).
- Credit cashback ; in which a lump sum is provided (usually) as a percentage of advance eg. 5% of the loan.
This level is sometimes combined: For example, 4.5% 2 years remain then 3-year trackers at BoE level plus 0.89%.
With each incentive, the lender can offer a tariff less than the cost of the lending market. Therefore, they usually charge a penalty if the borrower repays the loan in an incentive period or longer period (referred to as a tie-in extension). This penalty was formerly referred to as the exchange penalty or tie-in , but since the enactment of the Financial Services Authority rules they referred to as early repayment .
Self certification
This type of mortgage has been banned since April 2014 for UK lenders. Although they have not been completely banned by UK regulators as they are available from European lenders.
Mortgage lenders typically use salaries that are stated on a salary slip to earn an annual income of a borrower and will usually lend up to several times the annual income of the borrower.
Its certification mortgages, informally known as "self-cert" mortgages, are available to self-employed and self-employed people who have a deposit to buy a home but do not have enough documentation to prove their income.
This type of mortgage can be beneficial to people whose incomes come from various sources, whose salaries are mostly or exclusively commissions or bonuses, or whose accounts may not reflect the true reflection of their earnings. Mortgage collateral itself has two disadvantages: the interest rate charged is usually higher than the normal mortgage and the loan to value ratio is usually lower.
100% mortgage
Usually when a bank lends customers money they want to protect their money as much as possible; they do this by asking the borrower to fund a certain percentage of the purchase of the property in the form of a deposit.
100% KPR is a KPR that does not require a deposit (100% loan to value). These are sometimes offered to buyers for the first time, but almost always carry higher interest rates on loans.
Together/Plus a mortgage
The development of a 100% mortgage theme is represented by KPR Together Plus, which has been launched by a number of lenders in recent years.
Joint/Plus Mortgages represent loans of 100% or more of property value - typically up to a maximum of 125%. The loan is usually (but not universally) structured as a 95% mortgage package and an unsecured loan of up to 30% of property value. This structure is mandated by capital requirements of lenders requiring additional capital for loans of 100% or more of property value.
UK mortgage process
Setup fees and survey fees are a component of the cost of moving home in the UK.
Setup fees
UK lenders usually charge a fee for setting up a mortgage.
Valuation Cost
The setting fee will be followed by an appraisal fee, which pays the rented surveyor to visit the property and ensures it is sufficient enough to cover the mortgage amount. This is not a full survey so it may not identify all the defects buyers need to know about.
It usually does not form a contract between the surveyor and the buyer, so the buyer is not entitled to sue the contract if the survey fails to detect a major problem. However, buyers may have a drug against surveyors in a lawsuit.
Survey Cost
For an additional fee, surveyors can usually conduct a survey survey or home buyer survey (less expensive) at the same time.
International comparison
In the UK the mortgage-rate variable is more common, unlike fixed rate mortgages that are common in the United States. The level of home ownership is proportional to the United States, but the overall default rate is lower. In the UK, mortgage lending is less dependent on securitization assets (such as mortgage-backed securities) than the United States, Denmark and Germany, and more on deposits like Australia and Spain, since funds collected by the building community must be at least 50% of deposits. Thus, lenders prefer mortgages with fixed interest rates on fixed-rate mortgages to reduce the potential interest rate risk between what they charge in mortgage interest and what they pay in interest for deposits and other funding sources. Prepaid sanctions are still common, while the United States has banned its use. As with other European countries and around the world, but unlike most of the United States, mortgage lending is usually not a nonrecourse debt, which means the debtor is responsible for any credit deficiency after foreclosure.
References
See also
- UK mortgage terminology
- British land law
- Housing in the United Kingdom
Source of the article : Wikipedia
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