Mortgage lending rises slightly
Mortgage lending increased slightly in March, but the number of loans approved is still much lower compared with a year ago as consumers focus on paying off loans.
Latest figures by the British Bankers’ Association (BBA) show a 4.5% annual growth in net mortgage lending by the major UK banks.
However, gross mortgage lending of £8.7bn in March was less than the average of the previous six months (£9.2bn) and 0.4% lower than in March last year.
The BBA says low interest rates are encouraging borrowers to use surplus cash to repay their mortgages.
David Dooks, statistics director for BBA, says: "Low interest rates continue to influence customer behaviour. Homeowners are reducing mortgage debt by making, or maintaining, higher repayments using the extra cash generated by lower mortgage rates.
“People are also holding more cash in their everyday accounts, rather than building up savings accounts and overall unsecured borrowing levels are standing still.”
The Royal Institute of Chartered Surveyors (RICS) says the flatter trend in activity is broadly consistent with the feedback from its housing market survey, which shows new buyer enquiries have stabilised in recent months.
Simon Rubinsohn, RICS chief economist, says: "We still expect to see transactions gradually pick-up as the year progresses. One reason for this is that more property is now coming onto the market.
“In addition, it is likely that the stamp duty holiday announced in the Budget will encourage some first-time buyers to look to purchase property despite the continuing need to find a large deposit to secure a mortgage."
Brian Murphy, head of lending at independent mortgage broker Mortgage Advice Bureau, says: "A small rise in mortgage approvals last month is roughly in line with seasonal expectations.
“However, the picture in April and May is likely to be an entirely different one, with a levelling off in mortgage approval numbers predicted, at a time when housing market activity is normally at its busiest.
"The problem is, the recent rise in unemployment levels and the imminent general election has inevitably cast doubt in the minds of people looking to buy, and the likelihood is that many prospective buyers will hold off making a purchasing decision now until they know what the fallout is going to be after the votes are counted on 6 May."
According to Moneyfacts, competition is returning to the mortgage market with 2,076 mortgages available, the highest level since December 2008. A significant proportion of the new mortgages now available are for those with smaller deposits, which is another welcome boost for the mortgage market. Meanwhile, the average two-year fixed mortgage - the barometer of the mortgage market - stands at its lowest level in 12 months.
Michelle Slade, spokesperson for Moneyfacts, say: "The ‘open for business' sign is back in the window as lenders improve the availability of mortgages.
"Lenders are becoming more active in the mortgage market, which is welcome news for borrowers as increased competition is one of the overriding factors in driving rates downwards.
"A 25% deposit remains the benchmark for the majority of the most competitive deals. However, borrowers with a small deposit are increasingly getting access to a wider proportion of the market,” she adds.
