Since the turn of the year, the overall mortgage stock has started to rise, as stronger demand feeds through and is 1.1% higher than a year earlier. This contrasts with much of 2013 when new monthly borrowing was more than offset by elevated capital repayment (in part reflecting homeowners switching lenders).
Having declined during the early months of 2014, approval volumes turned up in June, in the aftermath of the implementation of the Mortgage Market Review, which might have slowed down processing of applications in the earlier part of the year.
Richard Woolhouse Chief Economist at the BBA said:
“These figures show that mortgage approvals are rising again after four months of decline. That’s encouraging because those decisions are a leading indicator of what’s happening in the housing market.
“But the jury is still out on exactly how the new rules are affecting customer applications or approvals.
“Nevertheless, the higher demand for personal loans suggests that the consumer’s confidence in the recovery is growing.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, says:
"Mortgage approvals are on the rise once more after four months of decline, which may come as a surprise as many agents are now talking of a cooling off in the housing market. However, the mortgage market remains busy, with many borrowers taking advantage of the cheap rates available.
"There has been much debate over the impact of the new mortgage rules on lending volumes. It is certainly trickier to get a mortgage, with different questions being asked and much more scrutiny of the information provided. However, it is not impossible to get funding and if you use a mortgage broker they will steer your application through.
"Remortgaging is down on the same period as last year - perhaps surprising with the excellent mortgage rates still on offer and the fear of an interest rate rise which should encourage borrowers to ditch their lender's standard variable rate. MMR is likely to be having an impact here: either homeowners are struggling to remortgage under the new rules or worry that they will, and so are not bothering even trying. However, with an interest rate rise coming at some point it is important that borrowers plan ahead and ensure they can afford their mortgage."
Duncan Kreeger, director of lender West One Loans, comments:
“Mortgage lending is going in the right direction. But the credit crunch that struck the financial world more than half a decade ago is not over. Gross mortgage lending in June is still down 45% from its pre-crisis peak.
“Structural problems in the UK housing market mean traditional lenders now face an uphill struggle. Having repaired balance sheets and lent more in the simplest of cases, banks now need to answer more difficult questions. At heart, weak wage growth will conspire with spiralling house prices to restrain mortgage lending – unless lenders can more actively encourage fresh supply. That’s why so many financial institutions are increasingly interested in alternative models.”
