Mortgage market still subdued with latest figures showing a mixed lending scenario

Gross mortgage lending across the residential market in the UK in May 2019 reached £21.9 billion, up just 0.4% year on year, according to the latest industry figures to be published.

However, the number of mortgages for home purchase approved by the main high street banks in May 2019 was 9.1% higher than in the same month in 2018, and reached its highest level since June 2016.

The figures from UK Finance also show that remortgage approvals were 3.7% lower and approvals for other secured borrowing were 5.9% higher than the same month a year earlier

Overall, monthly mortgage approval levels were marginally less than forecast but have remained at some of the highest levels in over two years, the industry body said.

Lenders believe that the figures are positive. ‘The latest mortgage approval numbers, whilst a smidgeon below forecast, have remained at a very healthy level indeed. In fact, along with the previous month, they represent some of the highest numbers since March 2017,’ said Alastair McKee, managing director of One 77 Mortgages.

‘Buyers are evidently no longer being deterred from the market and indeed are seeking mortgages at almost record numbers. The latest figures also represent the strongest June performance since 2015 and one has to ask, how strong the property market would be without the current Brexit uncertainty,’ he added.

John Phillips, national operations director at Just Mortgages and Spicerhaart, believes that the figures continue the shift from the regional lending trends at the end of last month with an increase in home purchase mortgage lending and a fall in remortgage approvals.

‘We knew there had to be a change at some point, as all those people who had been delaying buying because if Brexit would eventually decide to make a move, and now we can see that change has happened, with home purchase approvals at their highest level since June 2016, which is just after the referendum,’ he said.

‘And I hate to say it, but I think this is about Brexit. The deadline for leaving Europe has already been delayed until October 31, and could be again. House prices are relatively steady, rates are still low and incentives like Help to Buy are still in place, so now is a good time to buy. Plus, of course, home purchase always spikes over the summer so I think we will see levels rise further going into the next few months,’ he pointed out.

‘We can see that remortgage levels are down, but I don’t think that is particularly significant. There had been such a huge flurry of remortgage business over the past 18 months that it couldn’t stay at those levels forever so it was almost inevitable that it would start to slow down,’ he added.

But John Goodall, chief executive officer of Landbay, described it as another slow month for mortgage lending, with a potent cocktail of poor consumer confidence and subdued house prices. ‘However, it’s heartening to see a rebound in the number of mortgage approvals in challenging political and economic circumstances,’ he said.

‘For borrowers, the current landscape of low interest rates, stable inflation and impressive wage growth should lend some breathing space to their budgets, meaning things are looking up as we move into the second half of the year,’ he added.

The increase in mortgages for home purchase, rising to the highest level in three years, is encouraging under the current political climate, according to Mark Harris, chief executive of mortgage broker SPF Private Clients.

‘It suggests a much more resilient market than one might expect, and once a decision is made over Brexit, one way or another, we are likely to see a further uptick in transactions as pent-up demand is released. Lenders remain keen to lend and several have cut rates in recent weeks so mortgage rates are likely to remain low for a while yet, further supporting the market,’ he pointed out.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said that the figures are a useful lead indicator of likely market activity over the next few months. ‘The number of home purchase mortgage approvals is showing resilience once more irrespective of Brexit and other distractions,’ he explained.

‘While not too much store should be set by one month’s figures, they do reflect what we are seeing on the ground, more buyer activity even though some sellers are still reluctant to recognise the new realities of a softening market. Looking forward, it remains to be seen how many of these approvals turn into completions but the fact that they are approaching the seasonal norm must be encouraging news,’ he added.