Gross mortgage borrowing in May was £10.4 billion, similar to April but 5% lower than in the same month last year, the data from the British Banking Association shows.
Much of this could be to tougher new approval rules that were introduced in April 2014. For house purchase approvals, the annual comparison, adjusted for the effect of the new rules, suggests a year on year fall of 3%.
Indeed, Charles Haresnape, chairman of the Intermediary Mortgage Lenders Association (IMLA), pointed out that there has now been a fourth successive monthly rise in mortgage approvals which suggests the high street banks have got to grips with recent changes to mortgage regulations.
‘All the same, there were 5,000 fewer approvals in May than was the norm in the six months before the Mortgage Market Review (MMR) took effect. Clearly there is still some way to go before lending activity on the high street is fully restored,’ he said.
‘Looking ahead, our chief concern is that UK mortgage borrowers face another wave of changes headed their way in the shape of the Mortgage Credit Directive (MCD). The short term threat is that another transitional period will slow the applications process and reduce the industry’s capacity to lend,’ he explained.
‘In the long term, extra layers of regulation threaten to squeeze more consumers out at the margins. When the rules change so often, it is very hard to judge the right time to say enough is enough before we are left with a far more subdued market than anyone intended. Balancing consumer choice and financial safety is a constant challenge, and the Bank of England should stand ready to act if the pendulum swings too far in either direction,’ he added.
According to Steve Bolton, chairman of Platinum Property Partners, figures from the BBA show that there is life in the mortgage market, indicating that there has been a 2% jump in general mortgage approvals over the last 12 months.
‘However, the figures also show that lending to homebuyers is down on last year by 3%, meaning that access to the property ladder is becoming more and more difficult for many people. This means that the rental sector is likely to come under increased pressure as growing numbers of people look to it for longer term solutions to their housing needs,’ he said.
‘It is therefore of the upmost importance that the market is able to meet the needs of a growing population of renters, and provide them with high quality and affordable housing.
While renting is now a lifestyle choice for many young people, the majority still aspire to own their own home and certain types of rental properties can give would be buyers an advantage in times of stretched affordability,’ he pointed out.
John Goodall, chief executive officer of buy to let lender Landbay, explained that it is becoming clearer with every month that remortgaging is turbo-charging the rest of the lending market. ‘Whilst other forms of lending slipped away, only remortgaging could sustain positive growth year on year, a strong indication mortgage rate cuts are resonating among existing mortgage holders,’ he said.
He believes that buy to let can take a significant amount of credit for the mortgage market’s relative buoyancy. ‘It reveals what many in the industry have been witnessing first hand, investors are discovering buy-to-let property offers steady and secure returns. Rents are growing at a healthy pace whilst interest rates remain favourable, meaning those in search of a worthwhile investment are turning to buy to let,’ he pointed out.
‘With competition rife between lenders, landlords can now remortgage their buy to let loan and increase their net profits further against strong rental returns. This trend in buy to let investment has wider benefits for renters, who see a positive correlation between landlord investment and increased standards and choice in the market, he added.
Figures from the Council of Mortgage Lenders show gross mortgage lending in May, not seasonally adjusted, showed little change on the previous month or on the same month last year, up 2% on the previous month to an estimated £16.2 billion, but was 3% lower than the £16.8 billion of lending undertaken in May 2014.
Forward indicators of lending, such as Bank of England data on approvals, suggest that the market can expect an upturn in lending over the coming months, according to the CML which believes that a modest recovery is under way.
‘The economic environment is one that should support increased activity in the near term, coupled with low mortgage rates. But while we expect these factors to support activity, there is a limited upside, driven mainly by affordability constraints,’ said CML economist Mohammad Jamei.
John Eastgate, sales and marketing director of OneSavings Bank, pointed out that borrowers and new buyers continue to exhibit strong demand for mortgage finance. ‘This will feed through into June and July’s lending data when it is published. The UK housing market remains solidly anchored, with activity in the buy to let sector notably strong,’ he added.
According to Adrian Gill, director of Your Move and Reeds Rains estate agents, while on an annual basis the figures are down there are signs of the market rising again. ‘Just like the fable of the hare and the tortoise, there’s nothing wrong with slow and steady. House prices set a new record in May, despite growth trotting along at a more measured pace,’ he said.
