Remortgaging activity boosts lending market to £22.2bn
MORTGAGE lending rose to £22.2bn in May thanks to heightened remortgaging activity across the UK.
However, industry specialists have warned that an imminent rate rise may lead to a slowdown in the third quarter of the year.
The latest UK Finance figures showed that mortgage approvals were up by 8.8 per cent in May, underpinned by a sharp rise in remortgaging activity. Between May 2017 and May 2018, remortgaging approvals were up by 18 per cent, while approvals for new home purchases were down by 3.8 per cent over the same period.
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“Mortgage lending remained resilient in May, buoyed by the affordable borrower rates that are currently on offer,” said John Goodall, chief executive of Landbay. “First-time buyers and those remortgaging underpin much of this growth as they continue to take advantage of attractive deals amid speculation of a base rate rise.
“With inflation nearing the bank’s two per cent target, and wages falling, a rate rise has been put on hold until at least August for now. However, the Bank of England’s Term Funding Scheme coming to an end marks the inevitable rise in the cost of funding, so we might see mortgage rates rise in the coming months regardless of an interest rate rise. Until this happens, lending levels should continue to hold steady.”
This view was echoed by Jeff Knight, director of marketing at Foundation Home Loans, who said that mortgage lenders may see a spike in activity ahead of an August rate rise.
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“There is improved awareness of the range of mortgage deals available as potential borrowers now choose to shop around more,” said Knight. “Those considered ‘a specialist case’, who once may have struggled to access finance, are also taking up a greater share of the market so ensuring the rates and products offered are capturing the changing needs of these potential buyers is crucial to maintain momentum.”
The UK Finance report also found that credit card spending was 2.3 per cent higher than it was in May 2017, with outstanding levels of card borrowing growing by 5.7 per cent over the course of the year. Meanwhile, outstanding overdraft borrowing was 3.9 per cent lower year-on-year and personal deposits were up by just 1.6 per cent, reflecting the low interest rate environment and slow wage growth. Deposits held in instant access accounts were 4.4 per cent higher than a year earlier.
“May’s increase in mortgage approvals was driven by strong growth in remortgaging, as a large number of fixed-term mortgages came to an end and homeowners took advantage of a competitive market to shop around for attractive deals,” said Eric Leenders, managing director of personal finance at UK Finance.
“Increased efforts by lenders to contact their customers before their current mortgage deal expires have also contributed to this rise.
“There was modest growth in card spending, reflecting a boost to retail sales amid the good weather over the recent bank holidays and the Royal Wedding celebrations.
“However, the overall economic picture remains mixed, as household incomes continue to be squeezed. This may explain the growth of deposits held in instant access accounts, with consumers increasingly choosing to keep their money close to hand.”
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