Mortgage lending on the decline

We must not cause panic and must bear in mind that the majority of mortgages are on fixed rates so the important thing to consider is when does this fixed rate expire. Mortgages in London tend to be higher which means that mortgage loan sizes are higher. A 1-2% rate hike will have a bigger impact on £500k mortgage than one of £100k – but to be approved for a higher loan, incomes would be higher. All lenders have strict affordability rules and would have stress tested borrowing against potential rate hikes.
Inflation figures on 21st June will have a huge impact. If the Government can get inflation below 5% then that impacts positively on all aspects. Every lender has a duty of care to borrowers and the best advice if you are experiencing difficulties is to contact the lenders who have a number of solutions to help through difficult times.Mortgage choice in the capital could be higher than the rest of the country. A number of lenders offer schemes geared specifically for higher loans.

To stimulate mortgage lending, we need to let house prices fall. Nothing more, nothing less.

We don't need help to buy, rent to buy, Miras, stamp duty holidays, shared ownership, mortgage guarantee schemes or any other counter-productive method of propping up prices.

Let them fall, and whilst they are, put in place policies to stop them taking off again. That means including house prices in the 2 percent inflation target, more punitive taxes for second homes, holiday homes and foreign ownership, whilst relaxing the planning laws, and allowing local authorities to build social housing at scale.

Mortgage Lending will be stimulated when house prices fall. Many borrowers are put off by the huge increases in monthly repayments due to rises in interest rates. I expect that lending will decline as interest rates rise further.

Importantly activity is still up on the normal market of 2019. Clearly the property market Boom times of the COVID era were never likely to continue but the market is still steadily up on the long-term average. If anything the real issues in the rental market of supply way out of kilter with demand (40%+ up on 2019 levels) means that first time buyers have little option either move back home or buy somewhere.

To be frank what other lending figures could be expected - UK lenders put themselves in a tailspin at the time of the "Went a bit too far" mini-budget. They have then demonstrated that they have learned absolutely nothing from the panicking of last October and have now spent the last month behaving like apprentices at the helm of UK lending. Mortgage lending could be stimulated by the financial regulators implementing a review of the rate-setting behaviours of the last 9 months and questioning lenders on their decision skills. Beggars belief is a phrase that we keep quoting at www.MortgageShop.com.

Positivity being reported in the news will help buyers dramatically. Currently, people are worried they cannot afford it, so they don't apply or even enquire. I've had people who are so surprised at what they can actually afford due to them being told by everyone that its not worth it. I will agree though, London is a bit too pricey for anyone but very high earners at the moment. Lending would be stimulated if the people had more confidence in the interest rates. We need a few months of stability to make that confidence grow. Mortgage figures will stay around the same for a while. We need growth though, so lets hope it all changes for the new year.

Anecdotally, there does appear to be a definite north/south divide in how the mortgage activity and property markets are performing. In Scotland,housing market activity recently is showing some signs of slowing down after a hectic few weeks but this could as easily be attributed to the traditional seasonality of the summer period particularly as,in most areas,schools have begun stopping for the Summer break this week.It would seem inevitable that the second half of 2023 will be no less turbulent than the first, but until supply significantly starts outstripping buyer demand, the Scottish property market and specifically for first-time buyers looks like it will keep on turning.Although obvious affordability implications persist, the shock and awe of recent interest rate rises has little impact on sentiment for those securing their first home and so whilst other more rate-sensitive sectors may become less active, the (FTB) fuel to the markets fire will likely keep on simmering.