Mortgage borrowing continues to rise

Higher capital repayment (in part reflecting homeowners switching lenders) produced monthly contractions in net borrowing through much of 2013, but in the last few months the overall mortgage stock has started to rise, the data shows.

Mortgage borrowing assistance schemes are helping first-time buyers and housing chains generally, as housing market activity rises.

Compared to the same time a year earlier, January 2014 approvals were:

  • House purchase + 57%
  • Remortgaging + 51%
  • Other - 2%
January’s total for house purchase approvals is the highest since September 2007.

Commenting, BBA statistics director, David Dooks said: “Following on from last month, mortgage borrowing continues to rise compared to a year earlier as mortgage assistance schemes help first-time buyers and housing chains more generally. Approvals for new purchases have climbed quite significantly and are now at their highest point since September 2007.”

Richard Sexton, director of e.surv chartered surveyors, explained: “Demand is strong from the top to the bottom of the market. First-time buyers are keen to lock into cheap deals and get on the ladder. And lenders are actively trying to keep volume high, to get business through the door before MMR puts a cap on the volumes they can process.

“Lenders are welcoming high LTV borrowers back to the market, which has opened the flood gates to first-time buyers. Help to Buy is encouraging renters to get onto the property ladder. In the North East & Cumbria and the North West in particular, the scheme is needed to help cash-strapped borrowers get on the ladder. But Help to Buy is still needed in the capital, where deposit requirements are painfully high.

“House prices are rising quickly in many areas, and the increase in high LTV loans is keeping the life-blood flowing in the market – by stopping a host of buyers being priced out of the market entirely.”

Duncan Kreeger, director of West One Loans, said: “More people climbing onto the property ladder is wonderful news but we also need more housing for families to move into. While there is some exciting growth from the house building sector volumes are still lagging behind.

“To really kick start growth, as well as new homes, we need to make better use of existing buildings. Across the UK, scores of commercial properties are lying empty but can’t be converted to residential use because the right finance just isn’t available. Too many dilapidated properties can’t be transformed into comfortable homes and modern offices because high street lenders don’t have the capacity to secure complex loans that don’t fit the mould.

“To use space more intelligently, we need more intelligent, modern finance. But lending from the high street banks for property purposes has fallen for another month. Developers and investors need more flexible finance, which is why thousands of deals are leaving the bureaucracy of the mainstream lenders behind in favour of alternative finance.”