Gross mortgage borrowing in May was £10.4 billion – similar to April but 5% lower than in the same month last year.
However mortgage approvals have been steadily improving over the past five months. Allowing for the effect of the new mortgage rules which slowed down the processing of applications last May, approvals overall were approximately 2% higher, year-on-year.
For house purchase approvals, the annual comparison, adjusted for the effect of the new rules, suggests a year-on-year comparison of -3%.
Similarly for remortgage approvals, the adjusted year-on-year comparison was around +14% and for other approvals, the adjusted comparison was about -2%.
Richard Woolhouse, Chief Economist at the BBA, said:
“Household borrowing remains robust and this is indicative of the wider recovery we’re seeing in the economy.
“The increase in mortgage approvals this month is consistent with the trend we’ve seen since the start of the year. The numbers show that the property market remains buoyant after the general election. Fierce competition between lenders means that there are some great mortgage deals available from the high street banks."
Charles Haresnape, Chairman of the Intermediary Mortgage Lenders Association, commented:
“A fourth successive monthly rise in mortgage approvals 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 took effect. Clearly there is still some way to go before lending activity on the high street is fully restored.
“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. The short term threat is that another transitional period will slow the applications process and reduce the industry’s capacity to lend.
“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.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, added:
"With the general election finally out of the way, strong lending figures demonstrate that confidence in the housing market is riding high.
"Borrowers have been taking advantage of record low mortgage rates. The slight cloud on the horizon is rising swap rates as the prospect of an interest rate hike becomes more likely. Subsequently, it’s fair to say that we have probably seen the low point with fixed-rate products likely to edge up over the coming weeks and months. However, borrowers shouldn’t panic as any rises will be moderate. With lenders continuing to struggle to meet volume targets, much of the underlying increase in swap rates will be absorbed in lower lender margins.
"Remortgaging numbers also continue to grow as borrowers take advantage of lower rates and their improved circumstances to secure a new deal. Many people have more equity in their homes than they did a year or two ago, which should make it easier to remortgage. And with renewed talk of the possibility of an interest rate rise at some point, many borrowers are opting for the security of a cheap fixed-rate mortgage while they can."
