Home approvals and remortgaging falls in the UK

Approvals for house purchases and remortgaging in the UK have each fallen year on year, although net mortgage borrowing from the banks grew by 0.1% last month, the latest figures from the British Bankers’ Association shows.

Brian Murphy, head of lending at Mortgage Advice Bureau (MAB), said that it comes as no surprise that today’s BBA figures show remortgaging is propping up the total number and value of mortgage lending by the main High Street banks.

‘We saw 17% more remortgaging applications in our network in February, compared with January, with borrowers also enjoying the highest remortgage loan to value (LTV) at 62.1% in over four years. But with 800 extra remortgage applications approved compared to the previous month, it is a worry that the total number of purchase mortgage approvals fell by nearly twice as much,’ he pointed out.

He believes that offering incentivised funding for banks to draw on, as the government is doing, is only part of the solution as for the time being there has been little change in lenders’ criteria, and extra lending has largely focused on people who had access in the first place.

‘Ahead of the Help to Buy scheme launching in January 2014, there is plenty of time to consider whether a better targeted version of the Funding for Lending Scheme (FLS) would help to loosen the purse strings and support more people to make home purchases,’ he added.

According to Peter Williams, executive director of Intermediary Mortgage Lenders Association the fact that approvals for house purchases, remortgaging and other loans have each fallen year on year shows once more how important it is to open the door of the Funding for Lending Scheme to the non-banking sector.

‘Optimism was high at the turn of the year that great strides would be seen in total gross mortgage lending for 2013, particularly after four consecutive months of increasing purchase mortgage approvals by the main High Street banks. However in the first two months of the year we have seen almost £1.4 billion less purchase mortgage lending and more than 7,500 fewer purchase loans approved, compared with last year,’ he said.

‘It is understandable that many banks are sticking to their tight criteria in the current climate, but inviting the non-banking sector to access incentivised funding would be one way to help lenders deliver more for UK borrowers,’ he added.

David Newnes, director of LSL Property Services, owners of Your Move and Reeds Rains, believes that the mortgage market is bearing up extremely well under a sea of economic adversity. ‘High street banks are lending slightly more, and have rolled out a wider range of mortgages aimed at first time buyers. But the high deposits demanded by house prices and lenders to get a loan, married to the assault on personal finances from inflation and weak wage growth, means the mortgage market is only really treading water,’ he explained.

‘Consumers are focusing their energies on whittling down household debts, and building up their savings pound by pound. It is a painful process, but it is becoming easier. They will be hoping the government does more to muzzle inflation, which is eating away at their savings and monthly budgets. And banks are still hamstrung by punitive capital adequacy requirements and a squeeze on their credit lines,’ he added.

He pointed out that for mortgage lending to significantly improve, several things must happen. ‘First, banks need to be able to reduce high deposit requirements, which are stopping lots of borrowers from accessing the cheap rate deals on offer. Second, wage growth needs to improve and inflation must be brought under control so the strain on personal finances begins to loosen,’ he said.

He explained that the government must continue to support first time buyers through schemes such as Help to Buy which was announced last week but will not be fully implemented until January 2014.

‘While it’s frustrating they’re waiting nine months to implement it fully, the scheme will enable more first time buyers to realise their dream of home ownership, which has been a distant fantasy for far too many young people in this difficult economic climate. The new schemes will undoubtedly help unlock the door to home ownership for lots of waiting buyers,’ he added.