BBA: housing market slows

Nia Williams

February 25, 2015

Gross mortgage borrowing in January was £9.8 billion – 11% lower than in the same month last year. Despite slower demand in the second half of 2014, the overall mortgage stock in January was 1.4% higher than a year ago.

Approvals overall in January were slightly below December and some 21% lower than a year ago. Though turning up slightly in January, house purchase approvals were 20% lower than last January. Remortgaging and other approvals continued to trend downwards and were 21% and 25% lower than a year ago respectively.

Richard Woolhouse, chief economist at the BBA, said: “The housing market appears to be bottoming out with a slight increase in approvals for new purchases in the last month but this is still significantly down on the levels of activity we saw last year.”

Commenting on the figures, Adrian Anderson, director of mortgage broker Anderson Harris, said: “Net mortgage borrowing was slightly higher than in December but down on last January reflecting the slowdown in the housing market in the second half of 2014. Yet lenders are still keen to do plenty of lending so expect mortgage rates to continue to be extremely low, despite Swap rates starting to rise.

“While mortgage pricing is cheap and lenders continue to compete on rate, an unwelcome development over the past few weeks has been the introduction of loan-to-income caps by several banks, with TSB the latest to restrict borrowing to 4.5 times income.

“LTI caps are a very blunt tool; the introduction of the Mortgage Market Review and closer attention paid to affordability was supposed to be a more refined model for assessing how much someone can borrow.”

Patrick Bamford, director – mortgage insurance Europe for Genworth, agreed: “Aspirational first-time buyers and home movers face multiple challenges: high house prices relative to wages, strict mortgage lending criteria and a lack of housebuilding.

“Despite a wave of new high loan-to-value products appearing on the market, first-time buyers still face financial pressures from every direction. Unless they have a large deposit, they are left paying a far greater premium for 95% LTV mortgages than before the recession.

“While Help to Buy has certainly invigorated the product range for first-time buyers and provided a much needed boost to high LTV activity, greater lender appetite and competition needs to be encouraged to give buyers better rates.

“There is a huge amount of scope to expand on what Help to Buy has achieved and support a permanent return to a ‘normal’ market for first-time buyers. For all its merits, the current scheme is still nothing more than a temporary solution to a long term problem.”

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