Research based on anecdotal evidence may produce short-term benefits but only statistical analysis shows where we’ve been, where we are and where we’re going. And there seems to be a growing sense of anticipation surrounding the release of monthly housing and lending figures.
The recently published gross mortgage lending statistics from the Council of Mortgage Lenders are particularly useful and allow us to assess the state of the market.
The headlines may have been taken up by the decline in lending from 31.7bn in March to 28.8bn in April, but the numbers were still 18% up on the same period in 2006 and represented the biggest April on record – so not so cruel after all.
Given that the base rate has risen 1% over the past year, we shouldn’t be too surprised there’s been a small slowdown in lending activity. Borrowers are clearly responding to the rises and with many commentators predicting a further 0.25% increase, possibly as early as next month, a further drop in activity is on the cards. At the start of the year, many borrowers would have expected two or three rises, although perhaps not as early as January. So the month-on-month slowdown we have already seen in 2007 could be a consequence of borrowers bringing their purchasing decisions forward.
Now that those who did this have cleared the market, the rising base rate is having an impact on mortgage lending. Perhaps we can also see in the CML’s quarterly statistics a significant improvement in the ability of lenders to retain their customers.
The statistics show that while house purchase activity is strong, remortgaging is slowing down. Are the improved retention schemes of many lenders having an impact?
The dominance of fixed rate mortgages may not be as apparent in the months to come, especially if rates are at or near the top of the curve. This may mean brokers taking a long-term view will begin recommending trackers over fixes to flexible clients.
While the figures reveal there has been a slowdown in activity, the CML still suggests that lending will continue to grow and be about 4% to 5% higher this year than in 2006.
Most commentators agree that monthly gross mortgage lending figures will still hit the 28bn to 30bn range each month. So forget the doom and gloom – the figures suggest a healthy and stable market.