Mortgage approvals down in February

The latest data from the British Bankers' Association showed that February's gross mortgage borrowing of £7.8bn was above the recently monthly average.

Related topics:  Mortgages
Amy Loddington
25th March 2013
Mortgages
Net mortgage borrowing from the banks grew by 0.1% in the year to February.

Historically, the difference between gross borrowing and capital repayment produced positive net borrowing data each month. With lower levels of gross borrowing and high capital repayments being maintained as a benefit of interest rates remaining low, net borrowing gradually reduced to a flat balance through much of 2012.

In February, mortgage approvals for house purchase were 6% lower than in February last year. 2012 ended with reports of more first-time buyers looking to enter the market, which will help mortgage chains in due course. The average house purchase approval rose to £150,500. Approvals in February for remortgaging and other loans were some 15% and 38% respectively lower than in February 2012.

BBA statistics director, David Dooks said:

“Banks continue to support household borrowers, providing almost £8 billion of mortgage lending in February. But low interest rates allow homeowners more scope to increase repayments on their mortgages and reduce the outstanding amount. “Annual growth in unsecured borrowing on credit cards and personal loans has edged up over recent months, albeit remaining subdued.”

Peter Williams, Executive Director of IMLA, comments:

“The fact that approvals for house purchases, remortgaging and other loans have each fallen year-on-year shows once more how important it is to open the door of the Funding for Lending Scheme to the non-banking sector. 

“Optimism was high at the turn of the year that great strides would be seen in total gross mortgage lending for 2013, particularly after four consecutive months of increasing purchase mortgage approvals by the main High Street banks.  However in the first two months of the year we have seen almost £1.4bn less purchase mortgage lending and more than 7,500 fewer purchase loans approved, compared with last year.

“It is understandable that many banks are sticking to their tight criteria in the current climate, but inviting the non-banking sector to access incentivised funding would be one way to help lenders deliver more for UK borrowers.”

Brian Murphy, head of lending at Mortgage Advice Bureau, comments:

“It comes as no surprise that today’s BBA figures show remortgaging is propping up the total number and value of mortgage lending by the main High Street banks.  We saw 17% more remortgaging applications in our network in February, compared with January, with borrowers also enjoying the highest remortgage loan to value – 62.1% – in over four years.

“But with 800 extra remortgage applications approved compared to the previous month, it is a worry that the total number of purchase mortgage approvals fell by nearly twice as much.  Offering incentivised funding for banks to draw on, as the Government is doing, is only part of the solution. For the time being there has been little change in lenders’ criteria, and extra lending has largely focused on people who had access in the first place.

“Ahead of the Help to Buy scheme launching in January 2014, there is plenty of time to consider whether a better targeted version of the Funding for Lending Scheme would help to loosen the purse strings and support more people to make home purchases.”

Duncan Kreeger, director at peer-to-peer lender West One Loans comments:

“The frigid reality of mainstream lending is getting harder to ignore.  Some economists and politicians were talking about a “mortgage thaw” – but today’s news represents another cold front blasting down the high street.  This stumbling motion isn’t good enough, not when there’s so much ground to make up.  In February 2007 the BBA lent £18.2 billion pounds.  But this February, the same lenders were 57% behind that level. In six years, there’s been next to no progress.

“Of the 22 different trading names that make up the BBA, 14 of them – or 60% – have been bailed out by the taxpayer.  That performance is especially poor given the latest plans in the Budget to extend the Funding for Lending subsidy.  On Budget day itself, similar news was snuck out from the Council of Mortgage Lenders.  But for normal people trudging up and down the high street for a loan, it’s clear that mainstream mortgages are still thoroughly sub-zero.  With alternative finance borrowers can get a loan in 48 hours, rather than six years.  So members of the BBA will really need to get their skates on to compete in the 21st century.”

Ashley Brown, director of the independent mortgage broker Moneysprite, commented:

"With half the country frozen solid, Britain's mortgage lending climate is sliding back into the deep freeze too. Growth in net mortgage lending has fallen to negligible levels - up just 0.1% in a year. Stubbornly low levels of confidence are biting into people's attitude to money, with many more of us saving rather than borrowing. This is despite the Funding for Lending Scheme's success at unblocking the credit pipeline.

"It took time to kick in, but its impact has been undeniable. Mortgage lenders are open for business once again. 95% LTV loans are not just available, but more importantly they are affordable again as a genuine price war gets underway. For much of 2012 the main thing holding back the mortgage market was a lack of property for sale. With the housing market still weak in much of the country, sellers held back in hopes that things would improve.

"Now the housing market is making its first tentative steps towards a return to normality, but people's appetite for mortgages, even the good value mortgages available now, is being stymied once again by a paralysing lack of confidence."

Chris Love, a director at independent mortgage broker, Mortgage Simplicity, said:

"The 6% fall in mortgage approvals in February relative to the same month last year is a reminder of how the mortgage and property markets are still not functioning properly. Despite the Funding for Lending Scheme, the mortgage market remains very volatile and is being held back by two key factors: lender criteria and the lack of consumer confidence.
 
"Consumer confidence remains very low, primarily because high inflation is squeezing household incomes. Many people simply haven't got the appetite to take on more debt.
Banks are still being highly prescriptive and are turning away applicants who really should get a loan.
 
"The banks have yet to find that fine line that determines whether they should or shouldn't lend. At the moment they're getting it wrong more often than they're getting it right. Caution is one thing, excessive caution is another. With this in mind, it's not a rate war we need but a war on criteria.
 
"Criteria and underwriting are killing off too many viable applications at present and so it's more important than ever that people speak to a whole-of-market adviser."
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