And the bad news didn't end there as it was revealed that the number of total mortgage approvals has also fallen and is 15% lower, with house purchase approvals falling by almost 21% compared to March 2017.
Jonathan Sealey, CEO at Hope Capital, comments: “Today’s UK finance figures show that despite a very upbeat start to the year - gross mortgage lending in January was almost 10 per cent higher on January 2017 – March’s figures are down on 2017.
But it is a drop of just 2.7%, and actually, overall Q1 2018 is up 4% on Q1 2017 so I don’t think we need to read too much into it. Things tend to pick up coming into the summer months, and while high street lenders may have seen a slight drop, specialist lenders continue to see steady business coming through as customers increasingly turn to lenders who can offer them a more tailored service.
Last week, Mark Carney surprised the market when he hinted that interest rates might not go up next month after all, following differences in opinion on the MPC, but they have not ruled out a rise later in the year, so this may also encourage people to tie in deals now while we are still enjoying such low rates.”
Jeff Knight, Director of Marketing at Foundation Home Loans, commented: “Aside from the obvious impact of the rise in interest rates over the next two years, from which we can certainly expect a period of turbulence as lenders and borrowers alike adjust to the new norm, the interesting long-term change will be the specialist market becoming more mainstream. As people’s working patterns change, and older purchasers become a bigger part of the buyers’ demographic, those specialist cases will be far more regular.
On that front, it’s down to the industry to ensure it is consistently reviewing its offering to maintain interest, and guide those borrowers to the best possible deal to ensure they don’t miss out on securing finance simply due to lifestyle changes.”
Henry Woodcock, principal mortgage consultant at IRESS, commented: “After a decline in mortgage approvals in February, a modest increase in lending was expected in March, so an increase of 8.3% from the previous month has exceeded expectations.
Looking at the figures from the same period last year, things don’t appear to be so good though. Total mortgage approvals have dropped by 15%, with house purchase approvals falling by almost 21%.
There has been some positive movement in the market however, with first time buyer and home mover activity increasing and borrowers looking to re-mortgage to fix their costs before an expected May interest rate rise.
The RICS housing survey published this month indicates that the slowdown in the housing market continues, as March was the twelfth consecutive month showing a drop in buyer demand. This downward trend has been more prevalent in southern and London markets.
House price increases have also slowed, as consumers show more caution with continuing economic and political uncertainty and affordability has been hitting borrower limits in some locations. Also, as the stamp duty and tax relief changes impact the buy to let market, an increasing number of landlords are looking to exit.
The outlook for the months ahead will depend on whether there is an interest rate rise. And if there is, will it stimulate the remortgage market, or reduce affordability for first time buyers?”
John Goodall, CEO of buy-to-let specialist Landbay said: “Mortgage lending activity was fairly modest in March but remains up on last month's levels. Many are clearly still eager to take advantage of the record low interest rates and loan-to-value deals on the market. As far as buy-to-let mortgages go, there has been significantly more demand than at this point last year with a raft of two-year fixed deals reaching maturity following the stamp duty rush of 2016.
It will be interesting to see how traditional banks react in the next few months to the Bank of England’s Term Funding Scheme ending, and the impact that this will have on lending volumes. Introduced in the summer of 2016, the scheme has injected a significant sum of cheap capital into banks by encouraging them to lend. The end marks the inevitable rise in the cost of funding for banks, and therefore more expensive mortgages. While this is unlikely to have an immediate impact, we may see traditional banks gradually raise rates in Q2 so those looking to buy or remortgage may want to act now.”
Jeremy Leaf, north London estate agent and former RICS residential chairman, added: "Never was it so important not to put too much reliance onto one month’s numbers as only a few days ago we were commenting on the positive lending data for February rather than these slightly negative approvals. Needless to say, they reflect a rather mixed economic picture - one month up, one month down - but show a property market which is relatively uncertain as we approach the crucial spring period, which is usually the busiest time of the year.
At the coalface, what we have been finding since March is that there are more properties coming onto the market and buyers and sellers are negotiating hard to establish what both parties consider is a fair market figure in the new environment. Clearly any imminent increase in interest rates is not going to help an already fairly sensitive property market."
Richard Pike, Phoebus Software sales and marketing director, says: “This morning’s estimate for gross lending is encouraging compared to the drop in February. It’s easy to look at the figures month by month and see that lending is down on the same month last year. However, when you compare the first quarter of 2018 to 2017 lending is actually up 4%. We are obviously nowhere near the dizzying heights of 2007/8, but in the grand scheme of things we are on a fairly even keel. House purchase is the one element of the market that is proving difficult, but that is more likely down to supply than sentiment.”
