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Why Is Mortgage Lending on the Rise?

Carl Shave
Carl Shave
June 12, 2018

Despite what has been described in some quarters as a subdued housing market, mortgage lending continues to rise. The latest figures show that, in April, total mortgage lending reached £20.4bn, which is 13.3% higher than at the same time last year. There has also been an 11% increase in the number of mortgage approvals, according to data from UK Finance.

But, given that the number of residential property transactions was actually down by 2.7% in April year-on-year, just where has this extra mortgage activity come from?

The impact of remortgaging

While house buying activity has been on the slide, the level of remortgaging has surged. In fact, the number of remortgage approvals in April was 30% higher than a year earlier, with borrowers keen to lock themselves into an attractive deal now before a possible base rate rise.

The increase in remortgages has also been driven by the large number of owner-occupiers and landlords who are coming to the end of their current deals. The challenger banks are also battling to establish themselves in the market, which led to some very attractive rates.

“The figures are stronger than expected”

Former RICS residential chairman Jeremy Leaf said the figures were “stronger than expected […] bearing in mind other recent results, not just in terms of lending which is a reflection of previous decision making but approvals which demonstrates confidence in the future.”

Mark Harris, chief executive of  London-based broker SPF Private Clients, stressed the impact that competition has had on the market. “Lenders are seeking to increase market share, often providing additional incentives to borrowers remortgaging, including free survey and legal packages,” he said. “The mortgage market is oversupplied which will continue to drive down lender margins and pricing and this is great for borrowers.”

Will the growth in mortgage lending continue?

Forecasts from the Intermediary Mortgage Lenders Association (IMLA) suggest that mortgage lending will continue to rise in 2018 for the eighth year in a row, reaching its highest level since 2007. This is a trend that‘s expected to continue into 2019.

Despite a shortage of properties on the market, low levels of turnover, and obstacles for first and second-time buyers, gross mortgage lending is still forecast to reach £265bn for the year. Remortgage lending should reach £94bn, representing 35.5% of the total market. Buy-to-let mortgage lending is also expected to bounce back in the latter half of 2018, despite the adverse tax changes that have been made.

Although there’s still no clear consensus on when the Bank of England might increase the base rate, we expect to see a trend of lenders slowly upping their rates over the summer months. That means now could be the perfect time to find a new deal.

Whether you’re looking to buy your first home, find a new property or remortgage, The Mortgage Centres can help you find the mortgage deal that best suits your needs. So feel free to get in touch today.

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