Mortgage approvals by the main high street banks in May have also risen, increasing by 3% compared to the same month a year earlier. As in April, increased approval numbers were driven by remortgaging, some 18% more than a year earlier. In contrast, approvals for house purchase were 3.8% lower than the same month a year earlier.
Eric Leenders, Managing Director, Personal Finance at UK Finance said:
“May’s increase in mortgage approvals was driven by strong growth in remortgaging, as a large number of fixed-term mortgages came to an end and homeowners took advantage of a competitive market to shop around for attractive deals. Increased efforts by lenders to contact their customers before their current mortgage deal expires have also contributed to this rise.
“There was modest growth in card spending, reflecting a boost to retail sales amid the good weather over the recent bank holidays and the Royal Wedding celebrations.
“However, the overall economic picture remains mixed, as household incomes continue to be squeezed. This may explain the growth of deposits held in instant access accounts, with consumers increasingly choosing to keep their money close to hand.”
John Goodall, CEO of buy-to-let specialist Landbay said:
“Mortgage lending remained resilient in May, buoyed by the affordable borrower rates that are currently on offer. First-time buyers and those remortgaging underpin much of this growth as they continue to take advantage of attractive deals amid speculation of a base rate rise.
“With inflation nearing the Bank’s 2% target, and wages falling, a rate rise has been put on hold until at least August for now. However, the Bank of England’s Term Funding Scheme coming to an end marks the inevitable rise in the cost of funding, so we might see mortgage rates rise in the coming months regardless of an interest rate rise. Until this happens, lending levels should continue to hold steady.”
Henry Woodcock, principal mortgage consultant at IRESS, said:
“May has historically been a buoyant month for the mortgage market. However, this year, the RICS May survey highlights a muted market. Despite an increase in housing stock, all the signs suggested that any increase would be in single percentage figures. But the market has shown increased confidence with a slightly higher than expected monthly increase in gross lending.
“The increase in lending has continued, driven by homeowners and landlords looking to remortgage as fixed rates end. Many market commentators expect a base rate rise by the Bank of England in August, so this could also have been a contributing factor to the increase in mortgage lending.
“Lenders typically start to increase the cost of borrowing when they feel a base rate rise is on the horizon, but we’re seeing some unusual behaviour at the moment. Many seem to actually be offering competitive deals for fixed-rate home loans in a rush to attract customers hoping to secure a mortgage ahead of a potential interest rates rise.
“The latest Bank of England survey of household finances also suggests a positive outlook, identifying few instances where a modest increase in mortgage interest rates would detrimentally impact borrowers. So June is looking like it might be a good month for mortgage lending.”
