Mortgage approvals in the UK down for second month in a row

Figures published today (Tuesday 02 April) by the Bank of England confirm that while the overall value of mortgage lending increased in February, actual mortgage approvals fell.

The only modest increase in activity was in the remortgage market which is a blow to attempts to get more loans out to crucial first time buyers who are needed to boost the slow real estate sector.
 
The figures also show that house purchase approvals were behind January’s total and below the six month average.

Peter Williams, executive director of Intermediary Mortgage Lenders Association, said that it is now clear that better rates alone will not be enough to boost house buying in any significant way.

‘Many lenders are understandably cautious about relaxing their borrowing criteria, which is one reason why the Funding for Lending Scheme is yet to have the scale of impact that was hoped,’ he explained.

However, he pointed out that there is still hope that if it is implemented effectively, the new Help To Buy mortgage guarantee will encourage higher loan to value (LTV) lending. But this doesn’t kick in for another eight months.

‘Expanding the First Buy equity loan scheme to all new home buyers in the meantime will certainly help to boost the number of mortgage approvals. But with new build homes in short supply, we must hope that it also encourages house builders to increase output to meet the extra demand,’ added Williams.

Brian Murphy, head of lending at the Mortgage Advice Bureau, said that the figures back up the theory that home owners seeking better remortgage deals have been making the most headway since the turn of the year.
 
‘Interest has been sparked by some of the best rates we have seen in the market for a long time, which along with seasonal factors explains the monthly increase in both the volume and value of remortgage approvals,’ he said.

But he also said that with overall approvals down for the second successive month, it is important it is to encourage more activity in this area. ‘The equity loan aspect of Help to Buy will certainly help, but we must hope that the January 2014 launch for the mortgage guarantee scheme does not mean people hold back on home purchases before then,’ he explained.

‘It is vital that the Treasury and Bank of England keep homebuyers firmly in mind if they extend or adjust the Funding for Lending Scheme, rather than switching their attention to small businesses,’ he added.