Mortgage Lending Fails To Lift Up To Expectations

Date Published 03 June 2013

Despite increasing hype that happy days could be here again, mortgage approvals for house purchase stayed flat in April, the Bank of England has reported.

There were 53,710 loans approved, compared with 53,674 in March. The April figure was below consensus expectations and slightly below the six-month average of 53,729 mortgages approved for house purchase.

The value of house purchase loans was £53.7bn, below January’s figure of £54.5bn.

Approvals for remortgaging purposes turned in a slightly better performance and crept up to 30,313, an improvement on the six-month average of 28,323.

News of the virtual standstill in lending came as a blow to those who have been voicing confidence in the market.

Only last week, Nationwide said it was showing signs of real momentum. The RICS, which has been among bodies reporting increasing optimism, dismissed any idea that there had been over-hype – but said that housing transactions this year would still come in at less than a million.

Simon Rubinsohn, RICS chief economist, said: `You could be forgiven for thinking that much of the recent excitement over a broad-based pick-up in the housing market is being overdone. True, the latest data was a little above both the February and March numbers, but it was lower than in each individual month during the final quarter of 2012.

`So is the recovery story a lot of hot air? We believe not, and would point to the increased volume of traffic now going through estate agents as evidenced by the RICS housing market survey. This has historically been a good lead indicator of future mortgage activity and, in April, it climbed to its best level since the back end of 2009. Alongside this, expectations for future sales are also on the rise.

`If this more upbeat mood was not backed up by a fundamental improvement in the funding environment, we might be inclined to be a little more sceptical about this positivity.

`But the combination of both lower mortgage rates and a rise in LTVs on offer does provide a solid rationale why buyer interest in now a little stronger. We expect this to be reflected in mortgage activity data over the coming months.

`For the whole of 2013, we are now anticipating sales of around 980,000 compared with 930,000 last year.`

Richard Sexton, director of national valuations firm e.surv, part of LSL, said: `It will require a significant tour de force in the economy if the mortgage market is to fully regain its va-va-voom.`

The Centre for Economics and Business Research said that compared with July 2012, the monthly number of mortgages approved had risen by 14.3%. It said that one reason for this was the launch last summer of Funding for Lending.

It said that looking ahead, the Help to Buy mortgage guarantee scheme could also help to boost the number of mortgage approvals.

However, the think tank cautioned: `Improving credit market conditions, Funding for Lending and the Help to Buy scheme give us reason to expect that the number of mortgage approvals will rise in the future.

`However, due to the fragile economic recovery and the risks posed to the UK from the global economic scene, this is not a foregone conclusion.`