Strong growth in remortgaging papers over cracks in housing market
A surge in homeowners remortgaging helped boost the number of mortgage approvals in May, according to the latest figures from UK Finance.
But there are fears these figures are papering over cracks in the mortgage market, with the number of mortgage approvals for new purchases continuing to fall.
In total mortgage approvals by the main high street banks increased 3 per cent in May, when compared to a year earlier.
As has been seen in recent months, these figures are driven by a strong growth in remortgaging. Remortgage approvals were up 18 per cent last month, compared to May 2017 – as homeowners looked to take advantage of low fixed rates ahead of predicted rate rises later this year.
In contrast, the number of mortgage approvals for house purchases dropped by 3.8 per cent when compared to May last year.
In total, estimated gross mortgage lending for the total market in May stood at £2.2bn, 8.8 per cent higher than a year ago.
UK Finance managing director of personal finance Eric Leenders says: “May’s increase in approvals was driven by strong growth in remortgaging as a large number of fixed-term mortgages came to an end, and homeowners took advantage of a competitive market to shop around.”
He says increased efforts by lenders to contact their customers before their current mortgage deal expires have also contributed to this rise in approvals.
Former RICS chairman and north London estate agent Jeremy Leaf says: “This is more of a spring bump than a bounce as approvals for house purchases were lower at a time when we would have expected increased activity.
“Many buyers and sellers are sitting on their hands, and those that are recognising the new reality in this price-sensitive market are negotiating hard with transactions are taking longer as a result.”
Landbay chief executive John Goodall says: “Mortgage lending remained resilient in May buoyed by the affordable borrower rates that are currently on offer.”
However, he adds that while the Bank of England is keeping interest rates on hold for now, there is a chance that mortgage rates could rise in the interim, with cheaper funding schemes, such as the Term Funding Scheme coming to an end.
Source: Mortgage Strategy