The Bank of England’s housing market assessment shows that purchasing activity was down on the previous month’s numbers, but figures continue to improve as it appears that mortgage lenders gradually get to grips with the required changes the Mortgage Market Review has created. In July 66,569 loans were issued for home purchases, a significant increase on the same month in 2013, when 61,659 were approved. In addition, this provided a £1.5bn increase on the loans advanced during the same period in 2013.
The monthly assessment confirms while buying activity has continued to improve, the remortgage sector continues to dwindle month by month on last year’s figures, as the level of approvals compared to July 2013 state a 3.8 per cent reduction in agreed lending. This is by no means a concern, considering the value of loans agreed actually rose from £5.1bn to £5.2bn from last July, but does pose questions about attitudes towards interest rate rises in the near future.
The director of e.surv property surveyors, Richard Sexton, noted that: "After a tentative start to summer, house purchase lending has returned to robust health. Home lending dipped in April and May, as the introduction of new regulations temporarily clogged up the system. Now that backlog of applications has been processed, mortgage lending is running a smooth course once more."
Economists have been considering the implications of the data, with the director of GPS Economics, Gary Styles, stating: "There was a slight easing of purchase approvals in July, but overall I think these are positive numbers. We’ve heard a lot of talk about a cooling housing market but the data shows it has not been a significant contraction."
He continued to say that he feels that talk of impending interest rate rises have sparked the minor surge in purchasing activity over the last few months: "I think people are waiting to find out where the base rate will go but the rise of other forms of lending, normally the reserve of those who can’t obtain the mainstream lending types, is a clear indicator that people are worried about interest rates rising soon."
Mark McBurney, a mortgage consultant for Contractor Mortgages Made Easy, remarked on the details: "Enquiries have been on the rise over the last couple of months, with the signs that confidence in the market is again improving. The majority of queries relating to choice on interest rates revolve around the potential for increases over the coming 6-12 months, and it is difficult to judge exactly when the Bank of England will consider raising the base rate.
"What is heartening to see at the moment is that lenders have not taken the chance to instantly capitalise by raising rates. However, the moment there is any indication that the Bank of England will increase the bank base rate it is highly likely that lenders will begin increasing their margins. Any sudden changes would likely mean that business volumes will increase, causing further delays to mortgage processing timescales."
Article By: Simon Butler, Senior Mortgage Consultant at Contractor Mortgages Made Easy
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