According to the latest UK Finance report, gross mortgage lending is estimated at £24.2 billion, with the market rebalancing in the North of the UK.
Highlights from the report included:
- Housing market continues to grow modestly, dominated by first-time buyers
- There is evidence of rebalancing across regions
- Of the £24.2 billion in estimated mortgage lending, £13.2 billion was lent by High Street banks
Despite high levels of employment, with yet another 1% decrease in unemployment (now 4.3%); economic growth is slowing, with wage growth at 2.1%.
A lack of wage growth, combined with inflation running at 2.9% in August, has resulted in workers reducing savings and being more conservative with their spending. It is predicted that this will rise to 3% in October and then fall slowly after that.
As inflation rises, the Bank of England Monetary Policy Committee (MPC) may see fit to introduce modest monetary tightening in the form of a 0.25% base rate change. With already tightening budgets, this may propel home owners to secure the current and more favourable mortgage deals through their mortgage consultant.
A slowdown in the economy can also dampen the housing market. However, 12-month averages remain in line with predictions, showing activity that resembles 2015 figures, according to UK Finance. Despite economic challenges, lending sits at £24.2 billion in August.
First-time buyer activity continues to grow, owing to the various Government schemes and the appetite for new-build properties. This is, however, not the case for home movers, whose lack of help from schemes and shortage of available property discourages them from selling.
Buy-to-let still suffers from changes to tax and remains flat, however, remortgage activity among home owners is still increasing, as rates remain competitive.
According to UK Finance, there is also evidence to show that there is a shift away from London, with the North of England, Wales and Scotland showing signs of stronger housing activity. This may be due to affordability challenges, making outer London areas more appealing. UK Finance also identified that of the £24.2 billion in estimated lending, £13.2 billion was lent by High Street Banks.
The housing market currently has a number of Government schemes aimed at stimulating certain areas of the market, all of which will end at some point and new ones launched. According to the UK Finance report, “the Bank’s MPC minutes showed the committee voted unanimously to close the drawdown period for the Term Funding Scheme on 28 February 2018, as planned when the scheme was originally introduced back in August .”
In addition, the report also confirmed that buy-to-let landlords with a portfolio will be subject to stricter rules when they apply for a new buy-to-let mortgage, where underwriters (those who make the final decision on a mortgage application) will look at the risk of funding them. Although not set in stone, they will look at a landlord’s experience and how profitable they are with their existing properties. The report confirmed the date of 30th September 2017 for implementation.
Henry Knight, Managing Director, Springtide Capital commented: “As wallets are squeezed with inflation, low wage growth and the rumour of an interest rate rise, it’s a good time to review your mortgage with a consultant. The mortgage market is extremely competitive at present.
“Notably, the gross mortgage lending figures show that only £13.2 billion was lent by High Street banks, perhaps demonstrating what we see at Springtide Capital, that specialist lenders are sometimes better placed to fund some clients and their individual circumstances.”
For more information, please visit www.springtidecapital.com or call 020 3040 4400.