House purchase borrowing in 18 month high

Fresh data from e.surv has shown that mortgage approval numbers for home purchases reached an 18 month high during August, rising by 9.3% to hit 69,220.

This represented the highest monthly total since the 70,239 in February 2014.

Highs

In comparison to July, the number of house purchase approvals rose 0.7% and marks the third successive rise in approvals, with totals improving steadily since the General Election.

The improvement coincides with a growing sense that interest rates in the UK will rise next year. Bank of England Governor Mark Carney said that despite global economic uncertainty, particularly in China, base rates are likely to rise from 0.5%.[1]

‘While the global economy has been walking on eggshells as China’s economy stalls, the UK housing market has been striding forward on much firmer ground,’ noted Richard Sexton, director of e.surv chartered surveyors. ‘Weak inflation and recovering wages means that more British workers are able to meet the stringent affordability requirements demanded by MMR and obtain the mortgage they want. This latest resurgence of demand is pushing up prices. What’s more, banks are supporting those borrowers that need finance and many record-low rates remain. It’s a good time for many potential new buyers to get a mortgage and think about taking a first step on the ladder.’[1]

Mr Sexton believes that, ‘concerns over an interest-rate rise may have helped push some borrowers into acting quickly.’ He acknowledges however that, ‘this is now the third consecutive month of growth and home lending has been strong since May, now that the uncertainty surrounding the election has evaporated.’ He went on to note that, ‘healthier mortgage lending reflects a stronger UK economy and an upturn in fortunes for British buyers.’[1]

Small-deposit, big rise

Last month also saw the number of small-deposit borrowers rise in absolute terms, to a post-recession high point. In all, there were 11,975 small-deposit house purchase loans approved in August, up 7.5% compared to 11,140 in July and 6.2% up year-on-year. What’s more, last month was the greatest month for small-deposit house purchase lending since April 2008.[1]

As a proportion of all house purchase mortgage approvals, small-deposit borrowers now make up 17.3%, the highest proportion since September 2014. In addition, these transactions were up a significant 16.2% month-on-month.[1]

House purchase borrowing in 18 month high

The latest First Time Buyer Tracker from Your Move and Reeds Rains indicates that July saw 29,700 first-time buyer sales, which was the highest number since August 2007. Lending to small-deposit borrowers increased in the majority of UK regions during August, with Yorkshire and the Northwest seeing the most lenders of this nature.

In fact, Yorkshire’s small-deposit borrowers now represent 27% of the total number of home purchase borrowers in the region. In the Northwest, this figure is 26%.

‘First-time buyers have seen a revival over the last few months, buoyed by an increase in lending to small-deposit borrowers,’ noted Sexton. ‘This first-time buyer boost is largely the result of pent up demand, with many buyers finally able to afford their first foot onto the ladder after years of scrimping and saving. Further financial help schemes are being lined up for release and the Help to Buy ISA may spark further interest from first-time buyers when it comes into play at the end of the year.’[1]

Sexton believes that, ‘the Government could do much more to earmark sites for the development of affordable housing, as it is first-timers who are paying the steepest price to get on the ladder, as house price inflation pushes prices upwards’ He feels that,’ encouraging the older generation to downsize could be one answer,’ as this would, ‘free up larger family homes, increasing activity across the market and in turn, release more first-timer properties for new buyers.’[1]

[1] http://www.propertyreporter.co.uk/property/house-purchase-lending-hits-18-month-peak.html