Higher capital repayment (notably including more full redemptions, as homeowners move between lenders) continue to generate the contractions in borrowing stocks seen over the past year.
The volumes of approvals for house purchase (+24% higher than May last year) and remortgaging (+17% higher) continued the upward trend seen since the turn of the year. Assistance schemes for mortgage lending are also expected to help more first-time buyers and housing chains generally in due course. The average house purchase approval rose to £159,200.
Approvals for other loans in May continue to trend lower, no doubt reflecting reduced equity and a reluctance amongst homeowners to take on extra borrowing.
BBA statistics director, David Dooks said:
“New mortgage borrowing from the high street banks strengthened in May and approvals for both house purchase and remortgaging continued to rise. Unsecured consumer borrowing also saw a small net rise overall, in line with improved retail sales volumes.”
SMEs use of their own high levels of cash resources and large companies’ use of alternative finance, means demand for bank borrowing is subdued and a reflection of challenging trading conditions.”
Jonathan Harris, director of mortgage broker Anderson Harris, commented:
"The mortgage market continues to improve with borrowers attracted by lower rates and easing criteria. Help to Buy is already helping first-time buyers and is expected to give a further boost to this group, as well as second steppers, from January when the guarantee element of the scheme is rolled out.
There are fears in some quarters that mortgage rates will start increasing soon on the back of rising swap rates but there are many other factors coming into play which dictate pricing. There is no need to panic but it is worth seeking independent mortgage advice if you are concerned. We expect mortgage rates to continue to be extremely competitive in coming months as lenders vie for business.
Borrowers who can afford to do so continue to overpay on their mortgages, taking advantage of record low interest rates, and pay down debt where they can. This makes sense - why leave savings languishing in accounts paying such poor rates of interest when you can reduce your borrowing? There is also a reluctance to take on extra borrowing because of the uncertain economic and jobs climate.
While lending volumes are improving, we remain some way off a sustained recovery in the housing market as caution continues to prevail. However, mortgage brokers and estate agents are still reporting a high level of enquiries so we expect this to continue to feed through to improved official figures in coming months."
Jonathan Samuels, CEO, Dragonfly Property Finance, said:
"The mortgage market continues to power ahead, with both house purchases and remortgages up strongly relative to a year ago.
There's no doubt that both the property and mortgage markets are on a much more stable footing than a year ago. The Funding for Lending Scheme has made a difference.
Encouragingly, while people are more active on the mortgage front, they are proving conservative about taking on other forms of debt.
More people are now taking out mortgages but they are doing so much more responsibly. They are more aware of the pressure other debts can place on their finances.
If the property market is to have any kind of stability moving forward then there is still a need for consumers to deleverage.
UK households are still carrying a huge amount of debt and that still needs to be paid down before the property market can recover in earnest."
Brian Murphy, head of lending at Mortgage Advice Bureau (MAB), comments:
“Increased mortgage borrowing and house purchase approvals from the high street banks continue to fuel optimism for the market in May. Lending to individuals has remained positive despite a change in the Funding for Lending Scheme’s focus – seeking to boost lending to small and medium enterprises (SMEs).
The availability of rock-bottom fixed rates has revved up borrowing activity, as buyers and those remortgaging make full use of the outstanding deals on offer. With five year fixes falling below 4% for the first time in recent history there’s never been a more enticing time to enter the mortgage market.”
