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Bank of England Publishes Mortgage Lending Lowdown

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Bank of England  Mortgage Lending  Financial Conduct Authority  Mortgage Market Review  MMR  first-time buyers  residential lending 

Bank of England Publishes Mortgage Lending Lowdown

By - Wednesday 11 June 2014

The Statistical Release on Mortgage Lenders and Administrators Statistics was published by the Bank of England (BoE) and the Financial Conduct Authority (FCA) on 10th June, revealing the impact of tightened lending restrictions following the Mortgage Market Review (MMR) earlier this year.

The overall value of residential loan amounts outstanding in Q1 2014 increased by 0.4% to £1,243bn compared with Q4 2013, 1.2% over the past four quarters.

The report shows that lenders made gross advances of £47.1bn in Q1 2014 representing an increase of 38.5% year-on-year.

Overall fall in residential lending

However, extrapolating the figures shows that net lending advances fell from the end of 2013 to the end of Q1 2014 from £9bn to £7bn indicating a slowdown in lending after the MMR regulatory changes.

The proportion of lending to homebuyers fell 1.8% on the previous quarter to 66.4% of all lending and the amount of first-time buyers also fell by 0.5% from the peak in Q4 2013 to 20.1%. The value of residential loans advanced to first time buyers decreased over the quarter to £9.4 billion but was still greater by £3.2 billion than in Q1 2013, an increase of 52%.

Re-mortgage business increased by 0.9% from Q3 2013 to 27.4% bringing the value of re-mortgage lending to £12.9bn in Q1 2014 compared with £10bn in Q1 2013, an increase of 29%.

Buy to Let (BTL) lending increased to 14.4% in the first quarter showing a 66% increase in value terms over the past year – from £4.1bn advanced in Q1 2013 to £6.8bn in Q1 2014, the highest quarterly amount since Q2 2008.

Landlords increase market share

The increase in BTL business reflects budgetary changes earlier this year allowing pensioners to invest their retirement lump sums in the property market rather than purchasing an annuity which has significantly impacted the UK's BTL market.

81% of all gross mortgage lending was in the form of fixed rate loans, an increase of 10.3% compared with Q1 2013 and the highest proportion since the report series began in 2007. The proportion of balances outstanding on fixed rate loans increased by 2.3% since Q4 2013 to 35.2%.

In terms of interest rates, the overall average rate fell by 1bps in Q1 2014 to 3.24% which is the lowest interest rate since 2007, driven mainly by a decline in variable rate loan average of 6bps to 2.95%.

Director of mortgage broker Anderson Harris, Jonathan Harris said that "borrowers are protecting themselves where they can with more than 80% of new mortgages taken on a fixed basis. Even though the average fixed rate edged 2bps higher, while variable rates fell on average by 6bps, the growing threat of an interest rate rise means the allure of the fixed rate is strong."

Fewer first-time buyers

He continued: "The proportion of lending to first-time buyers declined by 0.5% on the previous quarter which is perhaps surprising given that the second phase of Help to Buy is well under way but this reflects the general easing across the market to which first-time buyers are not immune."

"We would expect to see a further falling off in lending volumes when the second quarter's statistics are published but this was always expected as they will cover the period when the mortgage market review was introduced."

Loan to value (LTV) lending providing 90% of the property purchase price increased by 1.5% to 3.6% of all lending in Q1 with the number of borrowers with an income multiple of over 4x remaining the same at 11.6%.

Mortgage arrears fell by 5% on Q4 2013 with the number of new arrears cases in Q1 2014 decreasing to 27.761, the lowest level since the report series began in 2007.

The figures appear to confirm that mortgage lending has slowed in the first quarter of this year indicating that measures introduced following the MMR have tempered lending although whether this will slow the overheated property market remains to be seen.


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