remortgaging
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Mortgage lending grew 4.9% in February to £19bn year-on-year, however this appears to have been driven by a rise in remortgaging to replace a collapse in house purchase approvals.

The £19bn total last month was also down almost £3bn on January and below the monthly average of £21.4bn for 2017.

According to the data from UK Finance, 33,110 house purchase mortgages were approved by just the high street banks in February, down by 10.8% compared to the same month last year. In contrast, 25,999 remortgages were approved by the same lenders, up 9.7% compared to February 2017.

Other secured lending was also hit, with 8, 615 transactions completed in February, down 3.9% on the same month last year. The trade body’s latest monthly lending update also appears to show that much of the growth may be coming from smaller lenders. While the £19bn February figure was a 4.9% overall increase, the high street lenders accounted for just a 1.8% rise in lending to £11.3bn.

Lock-in to rates

UK Finance managing director of personal finance data Eric Leenders said: “There has been an increase in remortgage approvals compared to last year, as borrowers look to lock-in to attractive deals amid speculation of further interest rate rises later this year.

“We are also seeing a continuing rise in credit card spending, reflecting the growing number of transactions carried out using cards, while other forms of borrowing such as overdrafts continue to fall.”

He added: “Meanwhile real wages continue to be squeezed by inflation, impacting on consumer confidence and retail sales. This pressure on household incomes should ease in the coming months, as the effect of the fall in sterling begins to fade and the strong labour market leads to a better outlook for wage growth.”

Lower lending in March?

IRESS principal mortgage consultant Henry Woodcock noted that the year had begun with some positive market indicators and although buy-to-let activity remained subdued, the number of first-time buyers and small deposit borrowers has been on the increase.

“With over 20 lenders increasing their rates in the last few weeks, house prices rising slowly, and the Bank of England signalling a May rate rise, we could see borrowers scramble to secure the best mortgage deals before the anticipated rise,” he said.

“We should also note the latest Royal Institute of Chartered Surveyors (RICS) housing market data, which shows the average number of properties on estate agent’s books hit new lows in February and newly agreed sales also dipped.

“So, it will be interesting to see if this leads to lower lending in March,” he added.

Buy-to-let activity

Just Mortgages and Spicerhaart group operations director John Phillips, agreed that the more significant news was remortgage approvals rising more than 9% in number and value compared to a year ago.

“This will most likely be because there is speculation of further rate rises, so borrowers are looking to lock in low rates now,” he said.

“It could also be to do with buy-to-let changes. Two years on, many of those who acted at that time will be coming to the end of their mortgage deals which could also explain some of the rise in remortgages.

“I think we will also see more activity in buy-to-let sector borrowing in the next week or so, because from April 1, the amount landlords can offset when calculating their tax bill drops from 75% to 50%,” he added.

Source: Your Money

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