Mortgage approvals hit 4 year high
Published by Max Salsbury for 24dash.com in Housing and also in Finance
Mortgage lending down 8%
January saw a four year high in the amount of mortgage approvals made, with loans climbing 17 percent to 65,194.
Chartered surveyors e.surv's research suggests the sharp rise can be credited to a combination of falling mortgage rates, a wider range of mortgages available to borrowers, and an improvement in lender confidence.
The firm's latest Mortgage Monitor reveals mortgage approvals climbed from 55,785 in December 2012 to 65,184 in January 2013, making it the strongest month for house purchase lending since February 2008 – before the financial crisis.
It also marked a 13 percent improvement on January last year.
The improvement in lending was driven by high loan-to-value (LTV) borrowers and first-time buyers, who accounted for the biggest overall share of the increase.
Lending to borrowers with a deposit of less than 15 percent increased by 30 percent between December and January - reflecting a significant improvement in the availability and affordability of first-time buyer loans.
One in eight of all house purchase loans in January went to high LTV borrowers, the highest proportion since February last year, when first-time buyer numbers were artificially high thanks to the rush to beat the stamp duty deadline.
Over the winter, a number of major lenders launched their cheapest ever fixed rate mortgages, which quashed mortgages rates on two-year fixed deals down from 4.44 percent to 3.92 percent.
The cheaper funds delivered to lenders’ balance sheets by the Bank of England’s Funding for Lending Scheme (FLS) was the root cause of the improvement in lending conditions. Since FLS launched, lenders have introduced more than 300 new house purchase mortgages.
Richard Sexton, business development director of e.surv, said: "These are the most encouraging signs for the mortgage market since the financial crisis. After an inauspicious start last autumn, Funding for Lending has come good. It has flooded lenders’ balance sheets with cheaper funds, which has encouraged them to reduce mortgage rates to record lows and roll out a much wider range of mortgages for high loan-to-value borrowers. It is helping clear the logjam in the first-time buyer market.
"The hope now is that January isn’t just a flash in the pan. There are plenty of reasons to believe it won’t be. Funding is cheaper. Borrower finances are better. And the Eurozone crisis lies dormant. All of this bodes well for the rest of the year. Lenders are more confident, and have been emboldened by Funding for Lending and by the relaxation of the speed at which they have to construct capital buffers.
"Much will hinge on the economy. If it slides into a triple dip recession lots of the confidence which has been built up over the last few months will evaporate and the recovery will go up in smoke. There are also concerns over the government’s plan to electrify the ring fence between retail and investment banking. The voltage from this could shock lenders into focusing their efforts on restructuring their businesses, rather than on where it is needed: on new lending."