Bank Mortgage Approval Rates Rise
The number of mortgages approved by banks rose last month from a 19 month low in August but lending is still down 15% year-on-year, figures from the British Bankers’ Association have shown.
The figures indicate that members approved 38,252 mortgages for house purchase in September, up from 37,241 in August.
Rebecca Harding, chief economist at the BBA, said: “Mortgage approvals picked up slightly this month but the housing market continues to shows signs of underlying weakness. Both house purchase and remortgaging approvals are down on the corresponding figures for 2015.”
According to Doug Crawford, chief executive officer of My Home Move, some commentators have fallen into the trap of looking at the year-on-year double digit decline in new lending in September and rushed to the conclusion that the housing market is underperforming.
He said: “But simplistic comparisons mask a very complicated picture. The reality of recent years, is that it is not clear what normal looks like when trying to benchmark the performance of the housing market. Taking a broader perspective and looking at the first nine months of the previous two years reveals that the number of approvals is only slightly behind 2015 and 2014 which were both incredibly strong years for housing sales.
“While the performance this highlights might not be spectacular, it is steady and reassuring, especially in the context of the shock caused by the Brexit referendum result and the forecasts of many that the housing market would freeze to a standstill. Instead, we are seeing people getting on with their everyday lives including buying new homes to live in.
“At its core, the housing market faces the same issues of undersupply that it has done for years. In the medium to long term, strong fundamentals will continue to drive a prosperous housing market as consumers get on with their everyday lives.”
The uncertain outlook due to Brexit and a continuing squeeze on affordability may have forced some home buyers to put their plans on hold, according to Andy Knee, chief executive of LMS.
He said: “Three months on from the vote to leave the European Union, the latest BBA figures suggest that home buyers remain in a tentative mood, with the number and value of mortgage approvals in September below the average for the previous six months between January and June before the referendum.
“House purchase approvals are also lower when compared to September 2015, indicating that the uncertain outlook and continuing squeeze on affordability may have forced some home buyers to put their purchasing plans on hold.”
He also pointed out that in contrast to the overall market, remortgaging activity has remained relatively stable, with little change in the number of remortgage approvals year on year. The overall value of remortgage approvals also experienced little change with a slight rise between August and September.
“Record low mortgage rates have remained the norm since the Bank of England’s cut to the base interest rate and home owners have taken advantage of this, with our research showing 85% of remortgagors lowering their mortgage rates in September. Rising inflation will encourage more home owners to take advantage of low rates by remortgaging to make monthly savings as the cost of everyday essentials increase,” said Knee.
“In spite of the dip in mortgage and house purchase approvals, demand continues to outweigh supply and the remortgage market remains very much on track as we approach the final months of 2016.”