Mortgage Approvals and Lending in February 2012

by Mark Johnston

Households are still being heavily squeezed, inflation is running ahead of wage growth and the financial crisis has not gone away as banks work to shore up their balance sheets amid the debt turmoil in Europe.

Bob Pannell, of the committee of mortgage lenders, stated “property sales remain fundamentally weak, but have shown strong year on year increases since the closing months of 2009”.

The Building Society Association (BSA) recently released figures that showed new mortgage approvals were up 31% on February 2011 figures and also up by 29% on January 2012, with £2.2 billion worth of mortgage approvals in February 2012.

These new mortgage approvals, the future pipeline of completions, have indicated an increased level of consumer activity with mutals.

Adrian Coles, director general of the Building Society Association (BSA), said “gross lending and new mortgage approvals by mutals continued to rise year on year in February, despite growth across the market as a whole remaining relatively flat”.

The Council of Mortgage Lenders (CML) estimated that gross lending for February 2012 was £10.7 billion, which is up slightly on January’s figure of £10.65 billion.

However, the Bank of England’s figures showed that there was a sharp dip in approvals even before the ending of the stamp duty concession for first time buyers.

In the current climate, mortgage lenders still remain really ‘picky’ on who to accept and figures show that there were just under 49,000 loans approved elsewhere in the market in February 2012, a big drop from the 58,000 approved in January.

The slump in mortgage approvals in February confirms what most experts believed, that the demand in loans was artificially boosted over the past 6 or 7 months by the stamp duty holiday.

Howard Archer, chief UK and European economists for IHS global insight, agrees and stated “mortgage approvals were clearly lifted towards the end of 2011 and early on in 2012 by first time buyers looking to complete before the concession ended in March”.

The latest approval figures also come on the back of rate hikes by several banks. Clydesdale and Yorkshire bank followed by the Halifax and Royal Bank of Scotland (RBS) all recently announced plans to raise their standard variable rates (SVR).

A report from the Bank of England has also suggested that many lenders expect mortgage availability to decline slightly over the coming months and other data also suggests that confidence in the housing market remains fragile.

Therefore borrowers are likely to have an even tougher time trying to secure a mortgage as employment conditions deteriorate and lenders tighten their lending criteria.

However, on a slightly brighter note the government has now launched their ‘new buy’ initiative. Many experts believe that the launch of this initiative will be an important addition to lenders ‘toolkit’ in addressing the various needs of would be borrowers.

The scheme, some believe, has the potential to offset the dip in first time buyer activity that the end of the stamp duty concession has produced.



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