The latest mortgage Lenders and administrators statistics from Quarter 2 have been released by the Bank of England which is highlighted by a rise in mortgage activity.
The outstanding value of all residential loans continued to increase in 2018 Q2 to £1,417.2 billion, 3.8% higher than a year ago (Q2 2017). Compared to the second quarter of last year, total gross advances increased by 6.4% to £66.7 billion. There was also a growth of 6.9% in gross advances from the first quarter of 2018. Re-mortgaging, as a proportion of new lending, has declined by 2.0 percentage points, compared to the previous quarter, and accounts for 30.8% of new lending, the total value of re-mortgaging lending was £20.5 billion in 2018 Q2. The value of new commitments was £73.2billion, an increase of 19.8% from Q1 2018. The share of buy-to-let (BTL) lending has declined since 2018 Q1, accounting for 13.1% of new lending.
Mark Pilling, Spicerhaart Corporate Sales Managing Director, says “The latest mortgage lenders and administrators statistics reveal that the proportion of total loans in arrears has continued to fall with the outstanding balance in arrears now £14.3 billion, compared to £14.8 billion in Q1 2018. And while this is positive, there is a danger we could see this trend start to shift over the next few months. As the base rate rise last month starts to affect people’s monthly payments – and with another rate rise on the cards before the end of the year- there is a danger that people could start to struggle with higher monthly mortgage payments.”
“While the vast majority of new mortgages are fixed rate deals, so won’t be affected by rate rises, around half of all mortgage owners – around 4 million people – are on either variable rates or trackers. Many of these borrowers will have got used to managing their finances around historically low rates, and could now be worrying about their affordability. The stats also show that the number of high loan to income and 90% LTV loans have both increased, which means there are potentially more borrowers pushing themselves to their financial limits, which could affect their ability to pay if their circumstances change.”
“Repossession should always be the last resort, so it is important that lenders continue to look at all the cases on their books and find ways to help any borrowers who are either already having difficulties managing their mortgage, or have concerns that affordability could become an issue down the line.”
Richard Pike of Phoebus said “While July is traditionally a busy month, it is clear that a number of people were kicked into action by the anticipation of the base rate rise, with the number of remortgages in July up a huge 23% on last year, and buy-to-let remortgages also up 7.3%. It was not such a rosy picture for purchases however. It is clear that consumer confidence is starting to take a hit, undoubtedly by all the talk of a no deal Brexit. Whenever there is uncertainty, people tend to put off making big decisions such as buying a new home. I expect to see more and more caution over the next six months as people wait to see what the outcome will be and what effect it will have on them personally. If ultimately, the result is better than expected, this could turn out to be pent up demand with a surge in house moves afterwards, but it could be many months before we see this come to fruition.”