Mortgage market back on the climb

July’s Bank of England Money & Credit statistics report indicates that there has been a slight upturn in June’s figures as the total value of loans hits 16.4m.

Brian Murphy, Head of Lending at Mortgage Advice Bureau (MAB) confirms that today’s loan approval figures show the mortgage market starting to rebound into growth after hitting a wall at the turn of the year.

"We have seen approval volumes on a downwards trajectory for much of 2014 as attention has focused on phasing in the new lending rules. Regulators effectively pressed ‘pause’ on 18 months of gradual recovery, but the bounce-back in June suggests that mortgage market activity is now firmly on track.

Homebuyers are leading the charge with the volume of purchase loans reaching a four-month high and exceeding the last pre-MMR total recorded in March. Remortgaging activity is trailing behind, but there is every chance this will change in the near future. An extra 2,089 borrowers were approved for a remortgage in June, compared with May – but thousands more will be eyeing up the potential to improve their existing deal while rates remain low.

Government, regulators and the Bank of England are all impacting on buying patterns this year through Help to Buy and policy changes.  Many of the usual rules have gone out of the window in terms of seasonal trends. Uncertainty about interest rates and mortgage availability means borrowers will want to stay switched on to the latest developments throughout the summer.”

Paul Hunt, managing director of Phoebus Software Ltd, notes that after a drop in lending most months this year, lenders have got to grips with the MMR.

"The slight rise in June’s lending figures could well be the first indication that lenders have now got to grips with the new underwriting required and can start processing larger volumes.  Of course one swallow doesn’t make a spring and at the start of what is usually the summer downturn it is likely that we will need to wait until September/October to see if this is the start of a series of rises or just a monthly blip.”

Richard Sexton, director of e.surv chartered surveyors, commented:

“The temporary log-jam in the mortgage market is beginning to clear, and lending has returned to healthy sustainable volumes. Lending slowed slightly after MMR was introduced, as banks adjusted to lengthier advisory sessions and longer processing times. The recent lending pick-up shows this period of transition is smoothing, and the backlog of applications caught in the system starting to reduce.

Many aspiring homeowners are still longing after their own slice of the property market. Demand is still high among first-time buyers in particular, and high loan-to-value lending hit a post crisis peak in June. More borrowers are being forced to take out proportionally larger loans, while wage growth remains sluggish and house prices continue to rise.

But although the bottom of the market is propelling lending volume, there is no need to assume they are causing a bubble. In the boom years, there were four times as many high LTV loans as there are now.  Increasing house building, thereby limiting house price rises, would reduce the number of buyers resorting to high LTV loans.  We must go to the heart of the matter and fix the supply shortage, rather than imposing lending caps to limit the effects of rising prices.”

Peter Williams, Executive Director of the Intermediary Mortgage Lenders Association (IMLA) suggested that the mortgage market is back on the climb, following the momentary blip brought on by changing regulations.

"Both the number and value of approvals have seen significant rises in the past month. But such growth is no cause for alarm and certainly not a cause for further intervention to curb lending, particularly given that the latest signs point towards a calming of house price growth.

In fact, with mortgage approvals in June falling short of the six month average by 2%, these latest figures suggest there’s still some catch up to be done to get back to where we were before the regulatory slowdown.

Total lending in June rose to £17.1 billion – placing it on a par with the six-month average and up 1.9% from a year ago. This upswing is a further sign that in spite of increasingly stringent criteria, lenders are still eager to lend to worthy applicants. However, borrowers must also start to prepare for a rise in pricing, with a higher base rate firmly on the cards and with politicians still in the very earliest stages of tackling the systemic shortage of homes”.