Annual approvals dip but impetus returns

Mortgage approvals were down 11 per cent year-on-year in February, according to figures published last week by the Bank of England.

Lenders approved 102,929 loans in February, down from 115,725 a year earlier. Gross lending was down 8 per cent over the same period, from £17.6bn to £16.2bn.

The number of approved house purchase loans fell 11.6 per cent year-on-year, from 69,893 to 61,760.

Remortgage approvals fell 4.5 per cent, from 33,620 to 32,099, while loans for other purposes – including further advances – fell 25.7 per cent, from 12,212 to 9,070.

But while year-on-year lending was down, home purchase and remortgage approvals were above the six-month average in February. Brokers say this is a sign that the market is regaining momentum.

Mortgage Advice Bureau head of lending Brian Murphy says: “[The] data from the Bank of England shows that momentum is returning to the mortgage market with loan approvals for house purchases steadily climbing from month to month. Homebuyers are showing no signs of being dissuaded by uncertainty surrounding the election and are taking advantage of market conditions that are ripe for borrowing at affordable rates.

“The combination of low inflation, moderating house price growth and a delay in the base rate rise seems to be working in consumers’ favour. Fierce competition between lenders is also a significant factor behind the rise in approvals. The emergence of more specialist lenders to compete with the high-street brands means that, even with rigorous affordability checks in place, customers have more options than ever to explore getting a loan.”

SPF Private Clients chief executive Mark Harris says: “February’s data reveals a consistently improving mortgage market with a greater number of loan approvals for house purchase and remortgaging compared to the average over the previous six months. 

“Government schemes aimed at helping first-time buyers are proving hugely successful, with the Help to Buy Isa set to raise awareness even further.

“The lack of inflation, and talk of an interest rate cut rather than a rise, could have an impact on people’s inclination to take on new debt. There are plenty of cheap mortgage rates to tempt them. While Swap rates ticked up in past weeks, they have since fallen and, with lots of capacity in the market as lenders such as HSBC and Tesco look to boost their offering via brokers, mortgage rates are likely to remain extremely competitive.”