BBA: Q1 sees increased mortgage demand

House purchase approvals are trending upwards as consumers take advantage of competitive prices in the mortgage market, although lending activity is still down on this time last year.

Related topics:  Mortgages
Rozi Jones
28th April 2015
house and savings

Though March was 14% lower than last year, the first quarter of 2015 has seen higher demand according to the latest BBA lending figures.

Gross mortgage borrowing in March was £10.1 billion – 6% lower than in the same month last year. Despite slower demand in the second half of 2014, the overall mortgage stock is 1.1% higher than a year ago.

Remortgaging and other approvals also increased in March, albeit some 10% and 26% lower respectively than a year ago.

Approvals overall were therefore slightly higher than in February, but some 14% lower than the same time a year ago.

Patrick Bamford, Business Development Director - Mortgage Insurance Europe of Genworth Financial, said:

“Despite the government initiatives currently on offer, both gross mortgage borrowing and house purchase approvals in March remain down from last year. This is partly down to the lack of certainty in the lead up to one of the most unpredictable elections in living memory.

"The positive news is that housing is high on the agenda for all parties, but whoever takes power after 7th May needs to provide a permanent solution to the challenges facing the long term sustainability of the housing sector, especially for first-time buyers.

“Government policies such as Help to Buy and the Help to Buy Isa are a step in the right direction, providing a much needed boost to hopeful first-time buyers, but remain only a short term fix and do not go far enough to solve the problems within the housing market. When the mortgage guarantee expires, the government must not allow lender activity to fall back to levels seen after the financial crisis, when high LTV loans were few and far between, even for the most prudent borrowers.

“The UK housing market needs a permanent solution like private mortgage insurance, which can support a permanent return to ‘normal’ levels of high loan to value lending, something the Help to Buy scheme cannot do.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, says:

"House purchase approvals are trending upwards with higher demand seen in the first quarter of the year. While numbers are down on the same month last year for house purchases and remortgaging, that was a frenzied time for the market and we now see a more considered phase, which is also likely to be more sustainable.

"Borrowers are taking advantage of record low mortgage rates and the signs are that these will continue to be competitive over coming months. Lenders have ambitious targets for the year and in order to achieve them will either have to compete on rate or loosen criteria. While many are not yet prepared to do the latter, they are tightening margins and cutting rates across the loan-to-value curve.

"As well as cheaper mortgages at higher LTVs providing a boost for first-time buyers, Government schemes are proving hugely successful, assisting those further up the chain as well as it helps keep everything moving smoothly.

"The lack of inflation means a rate rise this year is highly unlikely and could even have been pushed back for 18 months to two years. Crucially, when rates do edge up, the Bank of England has hinted that they will do so very slowly, eventually stabilising at around 1.5 to 2 per cent - much lower than we have been used to. Fixed rates are proving hugely popular - not so much because of the risk of a rate rise but because they are unbelievably cheap."

John Goodall, CEO of peer-to-peer mortgage lender Landbay, added:

“Deposits at high street banks have weakened because traditional savings models aren’t delivering decent returns. Pensioner bonds were an exception but these are fully subscribed and no longer an option. Cash is now flowing into investments beyond high street products – and beyond one-off government options like the pensioner bond.

“Meanwhile, traditional bank mortgage lending has been weak given tighter capital adequacy rules and the introduction of MMR.  

“As more investors consider peer-to-peer finance, the UK and the world are getting closer to realising the long-term impact of this financial revolution. Spreading the profits of mortgage lending is a growing part of that mission.”

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