February 19th, 2015
Activity levels in Quarter four 2014 provided the suggestion that mortgage activity was gradually reducing at a steady rate, partly due to the expected seasonal changes to business levels across the period, but also due to a continual decline in the level of interest from borrowers. According to data compiled by the Council of Mortgage Lenders, the remortgage market was particularly poor during the final quarter of the year, with activity dipping by 13 per cent on the same period in 2013.
In 2013, the levels of activity were steadily rising as 84,000 loans were approved for remortgage applications. But in the final quarter of 2014, the level posted was a far reduced 73,100. The overall value of loans approved also reduced from £12.3 billion to £11.3 billion. While the purchase market saw big strides in activity through-out 2014, despite the initial effects of the Mortgage Market Review bringing a minor slump in market movement, the volume of purchase loans agreed also reduced significantly by 3 per cent across the quarter.
The director-general for the CML commented on these figures: “The growth seen through 2013 and the beginning of 2014 in mortgage lending has softened in the last quarter, and we’d expect this steadying of the market to continue in 2015. In 2014, the mortgage market saw unprecedented change with the introduction of major regulatory reform but the market has adjusted and kept its stability throughout.
Looking forward to the remainder of 2015, Smee noted, “There will be challenges in 2015, including preparation work on the European Directive implementation and a general election potentially bringing new housing policies to be put in place. But the industry is stronger than a year ago and ready to meet the challenges going forward.”
Several factors appear to be playing a part in the current reduction in activity. Simon Butler, a mortgage consultant for Contractor Mortgages Made Easy, said: “Expectation around the election and what it could bring for the economy as a whole will certainly be on many minds. Falling interest rates are a positive, and many lenders have been drastically cutting margins over the past month.
“Although this is promising as an indication for rates to remain at low levels for a prolonged period, what this has also created is a sense that rates may continue to reduce even further. When the Governor of the Bank of England mentions the potential for an interest rate reduction, it is usually a sign that further drops are in the wind.”
With the slide in oil prices and the continuing battle between supermarkets for custom having a major effect on the rate of inflation, Mark Carney, the Governor of the Bank of England, was quoted last week on the matter, stating, “It will likely fall further, potentially turn negative in the spring, and be close to zero for the remainder of the year.” This led to leading economists pronouncing “2015 the year of the consumer”.
Article By: Simon Butler, Senior Mortgage Consultant at Contractor Mortgages Made Easy
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