UK Mortgage Approvals are on the Rise

The tighter rules on mortgage lending, saw the number of Mortgage Approvals falling in most months last year, the effects of which were not only a cooling of  the house price growth, but also a significant slowdown in the housing market.  Although concerns about a new housing bubble were eased, new fears were created over whether this slowdown would cause the housing market to grind to a halt as homeowners were unable to move, the supply of properties on the market began to shrink.

Despite the fears of the Property market grinding to a halt, UK mortgage approvals are on the rise in 2015 with approvals in January numbering 60,786 rising from 60,349 in December 2014.  Mortgage approvals rose by a fraction in February to 60,935, the trajectory appears to be steadily upward, although the overall mortgage approvals remain low by historic standards.

The increase in mortgage approvals needs to be looked at in context for although the increase in mortgage approvals to 60,935 in February is welcomed,  the number of mortgage approvals are still 17% down on December 2013.

Property market pundits predict that the property market is poised for another rise in activity as the “mortgage war” will between lenders intensifies, many lenders begin offering lower rates on certain types of mortgage deals.  Other factors said to support a continued recovery in mortgage lending are the reforms to stamp duty, the increase in the number of employed, stronger growth in real incomes (through a combination of salary increases and lower inflation) and lower mortgage rates.  Another factor to be considered as the fact that the growth in house prices continues to slow having fallen by 0.1% in February according to the Nationwide index, 0.3% according to the Halifax index the annual rise in house prices slowing to 6.6%.

Another significant feature in the rise in mortgage approvals is the rise in the number of “high loan to value” mortgages being approved (high loan to value mortgages are classed as being loans to borrowers with up to 15% deposit).  There were 10,298 high loan to value loans approved in February being a 10.7% rise on those approved in January (9300).  February marked the third consecutive month of growth in the approval of high loan to value loans.  Despite this continued rise in the level of high loan to value approvals, there are no fears that they will return to the risky levels seen in the years up to 2007 where high loan to value borrowers made up one third of the total mortgage lending.  A significant factor in the revival of the high loan to value mortgages is seen as being the governments Help to Buy Scheme which allows buyers to put down a 5% deposit with the government loaning or guaranteeing the remaining 5%..

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