Surprise rise in remortgaging
The number of loan approvals for house purchases stood at 62,226 in August compared to average of 56,597 over the previous six months, while approvals for remortgaging were 36,225 compared to the average of 31,629 over the previous six months.
David Copland, director of mortgage services for LSL’s financial services division, said: “We now expect lending to go up each month but the fact that purchases have increased so much in what is traditionally the quietest summer month indicates the extent that the market is gathering speed.
“What is surprising is that remortgaging has also increased. I would have expected this to remain static or even drop following Mark Carney’s announcement that Bank base rate will not rise for some time.
“However, with fixed rates remaining so low, the increase in remortgage numbers may be down to brokers calling the bottom of the market and advising their clients to switch to fixed rates now.
“Rises in both figures has to be good news for the economy as with every purchase and many remortgages there is the follow on spending on carpets, curtains, decoration and maybe even house extensions which will boost the economy as a whole.”
Richard Sexton, director of e.surv chartered surveyors, added: “House purchase lending has taken off, and that’s before Help to Buy even kicks in. It is 30% higher than August last year, with banks far more willing to lend to buyers with small deposits of under 20%. There have been 56,000 more house purchase loans so far this year than in the equivalent period last year, which represents a staggeringly quick recovery in the space of just twelve months. But there is still a long way to go.”
Sexton went on to say that the next phase of the recovery needs to focus on easing the squeeze on living standards, which will make it easier for would-be buyers to build a deposit.
“At the moment, the recovery is still being driven predominantly by equity-rich buyers in the south-east,” he added. “If it wants to reknit the heart and soul of the British housing market – and the economy in general – then the government needs to do more to address the cost of living and think about the regions outside the m25.
“It also needs to create an economy which encourages more house building so house price inflation can be kept under control, otherwise the next wave of first-time buyers will have their dreams of owning a home dashed.”
CML chief economist Bob Pannell said: “The Bank’s August data reflect the broader-based recovery in the housing market, with a £500 million pick-up in lending for house purchase to £11.3 billion. Remortgage activity was slightly weaker and dragged overall gross mortgage lending a little lower, at £16.4 billion, although underlying approvals data signal healthy house purchase and remortgage demand going forwards.”
Danny Waters, chief executive of the specialist broker, Enterprise Finance, said the mortgage market had reconfirmed that it is now well on the way to recovery.
He said: “It’s by no means generating the volumes it once did but the demand is there and high street lenders have returned to the table.
“Both house purchase and remortgage numbers are strengthening by the day, which shows that people have woken up to the exceptional rates currently available.
“As the economy gradually recovers, people will invariably take on more credit and that fact is highlighted by the 12-month growth rate in consumer credit, at 4%.
“But while credit is on the increase, people are considerably more conservative than they were in the past. People are starting to borrow again, but not recklessly.
“For the time being at least, borrowing is proving to be responsible, not profligate. The hope is that this continues and that neither lenders nor borrowers get carried away.
“What cannot happen is that people take on debt in the blind hope that the value of their home will bail them out.
“The property market is improving but there are no guarantees and if the economy starts to splutter again, things could easily go into reverse. Borrower beware.”
Jonathan Hopper, managing director of property search consultants, said:
“The mortgage market is out of the infirmary and running, not walking, back to health. The resurgent property market is matching it step for step.
“Lenders advanced £9.5 billion to homebuyers last month – and the number of mortgage approvals was 10% greater than the average over the previous six months.
“Many of the major lenders have been waging an interest rate war for much of this year, and rates have come down to eye-catchingly low levels. Crucially, the banks have started offering higher LTV products again. From next week the extended Help to Buy scheme will allow even more people to take out 95% mortgages.
“The impact of a fully functional mortgage market is to stoke demand for property everywhere, including beyond the hotspots of South East England.
“It’s telling that the Nationwide House Price Index is now showing average prices are on the up in every region for the first time in a long time.
“The growing sense that prices can only go one way from here, and that mortgages won’t get any cheaper than they are now, is delivering a steady stream of buyers.
“While supply is responding patchily to buoyant demand, we have seen a noticeable rise in stock levels.
“But it’s not just the number of new properties coming onto the market, the quality of new stock has improved markedly.
“Good quality properties are being snapped up in days, if not hours, particularly in London and the home counties. And we’ve even seen a return to the days of sealed bids for the best properties.
“The availability of mortgages ceased to be a problem a while back. Cheap credit is firing demand, and as housing supply struggles to keep pace, prices are rising steadily. While many leap into buying for fear of missing out, there is a danger that buyers will allow their hearts to get the better of their heads.”