May Mortgage approvals highest since 2009

According to the Bank of England’s Trends in Lending report, out today, mortgage approvals by all UK-resident mortgage lenders for house purchase and for remortgaging rose over the three months to May.

Also, the number of house purchase approvals in May was the highest since December 2009. In recent discussions, most major UK lenders reported that their pipelines of mortgage applications were strong in June. Repayments on lending secured on dwellings also increased slightly.

Recent indicators of mortgage distress were little changed or eased slightly. Data from the Council of Mortgage Lenders indicated that the mortgage arrears rate was broadly unchanged in 2013 Q1. The arrears rate on buy-to-let mortgages fell slightly in this period. The write-off rate on mortgages — the ratio of write-offs on secured loans to the stock of that lending — was little changed in 2013 Q1.

Claims for possessions issued in the courts were little changed in the year to 2013 Q1. The possessions rate — the ratio of the number of properties taken into possession to the number of outstanding mortgages — was also broadly flat in the year to 2013 Q1.

In recent discussions, the major UK lenders reported that over the past six months, indicators of mortgage distress (such as arrears) were slightly better than or in line with their expectations at the start of 2013, which had been for them to remain stable over this period. Looking forward, some major UK lenders expected mortgage arrears to fall slightly or to be broadly flat over the remainder of the year.

David Copland, director of mortgage services for the financial services division of LSL says:

“Increase in demand for prime, buy-to-let lending and purchases are expected to increase significantly, however while remortgaging had increased significantly in Quarter Two, governor Mark Carney’s comments appear to have affected the outlook for Q3 according to the banks, remortgaging which is now only expected to increase slightly in Q3, a reflection that borrowers are now more likely to stay on their standard variable rates and trackers for longer if there is no danger of a rate rise.

“It is increasingly obvious that the Chancellor has got Britain building again. There is a growing feel good factor which is having a positive effect on people’s appetite to move home but what we need to see now is an increase in net lending which is a strong indication of growing consumer confidence plus lenders relaxing their criteria and lending at higher loans to value.”

First Published in Financial Reporter