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, Director – Mortgage Insurance Europe for Genworth, comments: “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 (LTV) lending, something the Help to Buy scheme cannot do.”
Brian Murphy, Head of Lending at Mortgage Advice Bureau (MAB), had this to say: “After a subdued start to 2015, today’s figures show that mortgage activity is back on track, with total approvals at their highest level since July 2014. The value of mortgage lending is also at an eight month high. Although activity is slightly lower in comparison to this time last year, it’s important to bear in mind that the flurry of market activity observed in the first half of 2014 was exceptionally strong relative to previous years.
Lenders have maintained their appetite for business, and affordability conditions for consumers are steadily improving. Our latest National Mortgage Index* shows that the average salary of a purchase applicant is at its lowest point in over two years, as falling deposits and rising loan-to-value ratios (LTVs) help lower income borrowers onto the ladder. Fierce inter-lender competition also means that mortgage rates are still hitting new lows.
Speculation that the impending general election could dampen housing activity as yet appears to be unfounded, and recent announcements suggest there could be further policies to help first-time buyers onto the property ladder. However, the shortage of new build homes remains a concern, and could well stunt any growth in activity if housebuilding levels do not increase.”
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."
