Industry reacts to Bank of England mortgage approval figures

Following Bank of England figures revealing that mortgage approvals were at record levels in March the industry has been quick to react to the news. 

BoE figures revealed that net mortgage borrowing was £11.8bn in March, the strongest since the series began in 1993. This is higher than the pre-financial-crisis peak in 2006.

Nitesh Patel, Strategic Economist at Yorkshire Building Society, said: “Despite rising prices and uncertainty, housing demand remains strong, though there is some unevenness in the market, with larger, detached residences boasting outside space proving more popular than flats as people reassess their needs following a year of lockdowns.

“The housing market has also benefitted from the fact that home purchasers are typically from higher income groups but jobs losses have mostly been concentrated in the lower-paid occupations such as in the hospitality sector, which has been hit with a cruel blow by COVID-19.

“We expect lending to remain strong in the coming months, as demand remains at an elevated level driven by the current tax cut, low borrowing costs and buyers amassing large savings pots during lockdown.”

Lisa Martin, development director at TMA, also pointed to the stamp duty as the driver for demand.

She said: “There is no doubt that the surge in buyer demand has been fuelled by the Chancellor’s announcement of an extension and tapered end to the stamp duty holiday.

“Without a doubt, the focus for lenders and advisers has been on dealing with this increase in demand from buyers looking to take advantage of the tax break.

“However, over the long term, the market will be faced with another priority: supporting borrowers who continue to face financial hardship.

“Advisers have an opportunity to show their true value here by supporting these borrowers through this period of financial uncertainty. Now is the perfect time for advisers to get in touch with their clients to review how their circumstances may have changed and discuss what options would be most suitable for their personal circumstances.”

John Phillips, national operations director, Just Mortgages and Spicerhaart, also pointed to the value of advice as being of key importance at present adding that it will likely remain busy over the coming months.

He said: “With the record interest in moving, brokers and lenders deserve a great deal of credit for the huge number of mortgages that have been approved recently. Our brokers have delivered exceptional service while working from home, and as a result we are giving experienced brokers the option to work from home for the future.

“With other companies in a variety of industries making similar decisions, these changing working practices should fuel the desire to move, so the market should remain busy for the next few months at least.”

Whilst Jeremy Leaf, north London estate agent and a former RICS residential chairman, said that he wasn’t expecting to see much change moving forward but predicts that prices may soften.

He said: “Mortgage approvals are always a good indicator of future direction of travel for the market. And although these numbers are a little lower than the previous month, they reinforce what we have been seeing on the ground – buyers are determined to move even though many know the log jam in the system will mean they won’t be able to take advantage of the stamp duty concession before the tapering begins at the end of June.

“Looking forward, we don’t expect much to change although prices will probably soften rather than correct as more people’s requirements are satisfied and balance between supply and demand returns.”

Gareth Lewis, commercial director of property lender MT Finance, added that the figures bode well for the economy and future economic recovery.

Lewis said: “These figures are hugely encouraging, showing the consumer in a strong position, as well as good potential for economic growth and stability. Consumers are able to buy property and continue to transact, move home, improve and are paying off their debts.

“While net borrowing was at the highest level since the series began, it is interesting to see that approvals for house purchase were lower. This may be down to the extension of the stamp duty holiday, which removed the immediate pressure in terms of getting deals done.

“The high level of credit repayments show that borrowers are wisely using their money during lockdown and putting it to good use in repaying debt. It is always a concern that people carry on spending or sit on their cash but repaying debt puts them in a stronger position going forward.

“Over coming months, the landscape will change as people start spending money again – the busyness of Oxford Street over the weekend suggests that consumers have that desire to spend money still, which is essential for the economy.”

Meanwhile, Jonathan Sealey, CEO at specialist lender Hope Capital, said: “This has to be seen as yet more positive news for the property market and the wider economy, off the back of the return of 95% LTV mortgage products and various government initiatives announced at the last Budget in March.

“However the pressure on the sector to meet the unprecedented level of demand over recent months has highlighted the benefits of looking at specialist lenders which were able to step up when the high street stepped back at a crucial time for homebuyers.”

Steve Seal, managing director at Bluestone Mortgages, concluded: “It is reassuring to see that the mortgage market continued to show strong signs of recovery during March. Policies such as the stamp duty holiday have further rallied buyer appetite and have no doubt contributed to today’s statistics.

Lenders and advisers have played a crucial role throughout this time, ensuring that borrowers have been able to progress with their transactions amidst much uncertainty. Over the long term, however, the challenge will be to support the thousands of borrowers who emerge from the pandemic in a more precarious financial situation than they were before. Borrowers in this position could risk being locked out of high street lending altogether.

“Specialist lending will be essential for this cohort and could provide them with the financial lifeline they need. Looking ahead to a post–coronavirus future, there will be several opportunities for the specialist market to grow and capitalise on the need for specialist lending.

“Lenders and other key players in the specialist market should therefore gear up now to ensure that they are well prepared to serve this market as the number of non-vanilla customers continues to rise.”

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