Mortgage approvals for house purchases, an indicator of future lending, fell back slightly from April to 65,400 in May, the Bank of England’s Money and Credit statistics has found.
Approvals remained broadly in line with the narrow range seen in previous years.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “The number of mortgage approvals for house purchase, which indicate at what level future lending will be, fell back slightly in May but remain broadly in line with the narrow range seen in previous years.
“It shows that the mortgage market is trundling along quite steadily with no great shocks either way. This is reassuring as there is plenty of political and economic uncertainty, which is preying on people’s minds and creating a delay when it comes to making big decisions
“Lenders remain keen to lend and several have cut rates in recent weeks, so mortgage rates are likely to remain low for a while yet, further supporting the market.”
Net mortgage borrowing by households fell to £3.1bn in May, the smallest increase since April 2017. However, the annual growth rate for mortgage lending remained stable at 3.2%, and has now been around 3% since late 2016.
John Phillips, operations director at Just Mortgages and Spicerhaart, added: “There is not a huge change here; net mortgage borrowing fell slightly, but the annual growth rate for mortgages has remained stable at 3.2%, which means it has now been steady at around 3% for almost three years.
“Approvals, however, were down for both house purchase and remortgaging, which could suggest that lending will fall over the next few months and growth may slow too.
“There is no doubt that it has been a funny old few years for the mortgage market. Brexit has obviously had – and is still having – an impact, but I don’t think it is the only factor at play.
“For many years now, borrowing costs have been very low, but wages have not been keeping pace with house prices, so while mortgages are affordable, deposits and stamp duty are not.
“Those who may have upsized in the past are now either remortgaging to borrow more and then extending, or just saving the money they would’ve used on stamp duty and investing it into their existing homes.”
Phillips said that if the government wants to get things moving again, it needs to do something about the cost of moving, in particular stamp duty.
He said: “People are simply not prepared to throw thousands of pounds that could be used to invest in a bigger home on stamp duty.
“Back in April, the House of Lords Committee on Intergenerational Fairness and Provision recommended changes to stamp duty because, they said it is ‘seriously distorting the market’ and I think they’re right. Until something is done about the crippling cost of stamp duty, the market will continue to struggle.”
The number of approvals for remortgaging fell in May, to 46,700.
Nick Chadbourne, chief executive of conveyancing solutions provider LMS, added: “Remortgage activity figures from the Bank of England show the market is resilient, buoyed by near record low interest rates and high product expiry rates in Q2 this year.”
“In fact, LMS’ latest remortgage snapshot shows that there was a spike in remortgage activity to 53,624 and almost half of those who remortgaged opted for a 5-year fixed rate deal.
“LMS’ data also shows 65% of borrowers expect an interest rate rise within the next year, so we expect the trend towards long-term fixed rate deals to continue throughout 2019.”
Kevin Roberts, director, Legal & General Mortgage Club, said: “The government’s Help to Buy scheme has improved affordability for first-time buyers, and with mortgage lenders increasingly offering 95% loan-to-value products, they have unparalleled access to the finance they need.
“The low interest rate environment has also encouraged existing homeowners to remortgage onto longer fixed-term products – giving them certainty over their future repayment costs.”
By Michael Lloyd
Source: Mortgage Introducer