BoE: Mortgage demand rising
The lenders polled revealed that mortgage demand for house purchases and remortgaging was strong in Q2 2014, while it is set to continue in the next three months, Ryan Bembridge writes.
Demand for buy-to-let products also increased during the second quarter and the Bank of England predicts that it, along with prime loans and other kinds of lending, will continue to grow in the third quarter of 2014.
Jonathan Harris, director of mortgage broker Anderson Harris, said: “As lenders expected, demand for mortgages for house purchases increased significantly in the second quarter of this year, with lenders expecting demand to rise again over the next three months.
“This contradicts some other indices which suggest that the housing market is taking a breath. Demand is still strong as buyers remain confident of their ability to get a mortgage and their perception that now is a good time to buy, with more stock coming onto the market.”
Both maximum loan to values and loan to income ratios have increased over the past three months, yet the loan to income ratio is expected to fall in the next quarter.
Brian Murphy, head of lending at Mortgage Advice Bureau, said: “Aspiring homebuyers have waited a long time to see an increase in willingness to lend at loan to value ratios above 90%.
“Wider availability of credit is a welcome sign that the mortgage market is returning to normal, and it would be a travesty if this over-due pickup after years of stagnation is quashed by over-eager efforts to keep house prices in check.
“The fact that lenders expect maximum loan to income ratios to fall for the first time since the start of 2012 suggests there is little danger of lending activity running away with itself.
“There is a common consensus that mortgage approval rates are firmly in check as a result of the Mortgage Market Review, and we must ensure that activity isn’t dialled down so far that credit worthy borrowers are disadvantaged again.”
RBS and Lloyds have already tightened their lending criteria with loan to income caps, while Santander is rumoured to be on the verge of following suit.
Jonathan Harris added: “The market is correcting itself, without the need for external interference.
“Lenders also expect a decline in approval rates going forward because of tougher lending rules as part of the Mortgage Market Review and restrictions on larger loans introduced by some lenders, making it harder to get a mortgage.”
It was also revealed that lenders envisage approval rates dropping in the next quarter.
The report said: “Some lenders noted that changes introduced as a result of the Mortgage Market Review might reduce approval rates somewhat.
“In addition, some lenders suggested that a tightening in lending standards on large loans with high loan to income ratios may also push down their approval rate a little.”