The Bank of England Trends in Lending report noted that part of the recent slowdown in approvals might reflect the introduction of the Mortgage Market Review as banks introduced new processes and trained staff.
Contacts of the Bank’s network of Agents noted that activity in the housing market had eased over the same period. This was thought to be due to a continued shortage of properties for sale and the implementation of the MMR, which had slowed the processing of mortgage applications.
Gross secured lending in the three months to May was broadly similar to the previous period. The average monthly net lending flow by UK-resident mortgage lenders was slightly higher than the previous three months. The annual rate of growth in the stock of secured lending to individuals rose slightly to 1.3% in May.
Recent indicators of mortgage distress were little changed or eased slightly. Data from the Council of Mortgage Lenders indicated that the mortgage arrears rate fell slightly in 2014 Q1. The write-off rate on mortgages — the ratio of write-offs on secured loans to the stock of lending — was little changed in the year to Q1.
Claims for possessions issued in the courts fell a little. There was little change in the possessions rate — the ratio of the number of properties taken into possession to the number of outstanding mortgages — in this period.
Peter Williams, Executive Director of the Intermediary Mortgage Lenders Association, comments:
“We are still some way off a fully functioning mortgage market, even with a 10% quarterly and 21% annual increase in gross lending. With new checks and balances in place, there is still room for muted growth without the risk of careering out of control. The combination of MMR and macro-prudential action means there is now a strong safety harness fastened firmly around lending activity.
“Despite concerns from the Bank of England over rising house prices, there are also some encouraging signs for first time buyers with lenders increasingly willing to lend at 90% LTV and these products experiencing less of a price hike than at 75% LTV.
“The reality for borrowers is that mortgage pricing is likely to creep further upwards in the second half of the year. With a higher base rate on the cards and a shortage of sale properties still a reality, there is no sensible rationale for any further action to cool mortgage activity – certainly not while the full effects of recent changes are still unknown.”
