"As the base rate rise last month starts to affect people’s monthly payments - and with another rate rise on the cards before the end of the year- there is a danger that people could start to struggle with higher monthly mortgage payments"
According to the data, the proportion of high loan-to-income lending made a comeback against last quarter's figures seeing an increase of 1.2% to 45.1%. BoE also reports that first time buyers increased their share of the market to 21.4% in Q2 2018 - a rise of 1.8% against the previous quarter.
However, a possible indicator that existing homeowners are remaing cautious due to Brexit and other factors was the proportion of remortgaging within new lending declining by 2% compared to the previous quarter. Remortgaging now accounts for 30.8% of new lending and reached a total value of £20.5 billion in 2018 Q2.
Buy-to-let lending was also down during Q2 as many landlords, still reeling from a wave of new taxes and legislation, continued to sit on their portfolios or leave the sector entirely. BTL lending now accounts for 13.1% of new lending.
As ever, the industry was quick to react. Here's what they're saying:
Mark Pilling, Spicerhaart Corporate Sales managing director, comments: “The latest mortgage lenders and administrators statistics reveal that the proportion of total loans in arrears has continued to fall with the outstanding balance in arrears now £14.3 billion, compared to £14.8 billion in Q1 2018. And while this is positive, there is a danger we could see this trend start to shift over the next few months.
As the base rate rise last month starts to affect people’s monthly payments - and with another rate rise on the cards before the end of the year- there is a danger that people could start to struggle with higher monthly mortgage payments.
While the vast majority of new mortgages are fixed rate deals, so won’t be affected by rate rises, around half of all mortgage owners – around 4 million people - are on either variable rates or trackers. Many of these borrowers will have got used to managing their finances around historically low rates, and could now be worrying about their affordability.
The stats also show that the number of high loan to income and 90% LTV loans have both increased, which means there are potentially more borrowers pushing themselves to their financial limits, which could affect their ability to pay if their circumstances change.
Repossession should always be the last resort, so it is important that lenders continue to look at all the cases on their books and find ways to help any borrowers who are either already having difficulties managing their mortgage, or have concerns that affordability could become an issue down the line.”
Suchit Sethi, founder of Cashback Remortgages, had this to say: “These official figures paint a mixed message for the state of the housing market. The fact that there was an increase in overall mortgage lending suggests those looking to move had a sense, correctly, that interest rates were on the verge being raised.
However the figures show remortgaging was down by a significant two percent compared to Q1, indicating that, sadly, many homeowners were effectively blindsided by August’s rate rise. Lenders have been passing this rise on which means that, for many, the boat has been missed and repayments will rise when they finally get around to remortgaging.
The question now is what effect will the rate rise have in Q3 and we wait with baited breath to see what impact a potential no-deal Brexit scenario has on the housing market - which in truth, has been teetering on the brink for some time.”
Ross Boyd, founder of mortgage platform, Dashly.com, said: “Brexit pessimism faded over the summer as borrowers shrugged off any uncertainty with a resurgent risk appetite.
The proportion of higher loan-to-value (LTV) mortgages fell in the first quarter of the year but rose once more in the second as buyers turned their back on doom-mongering doubts over how the UK’s departure from the EU will play out.
But where homeowners tread, landlords are continuing to choose not to follow. For investors it’s more of the same, with the decline in buy-to-let lending since the first quarter firmly against the run of play. It’s yet more evidence of a slowdown precipitated by hostile tax changes in recent years that have left landlords licking their wounds.
Traditional homeowners, though, are not feeling the pinch quite so much and arrears continue to fall. It’s yet another sign of consumer confidence, even if it’s not totally surprising with rates still on the floor by historic standards.”
