Mortgage Approvals Rise in Q2
Mortgage approvals in April and May were higher than the first quarter’s (Q1) average, as mortgage rates are still at record low levels, revealed the Bank of England’s (BoE) Q2 credit conditions review.
Remortgaging approvals also rose in Q2, however, mortgage approvals for house purchases and remortgages are still considerably lower than in the years before the financial crisis.
Mortgage Approvals Rise in Q2
The monthly net flow of mortgage lending grew slightly in the three months to May, however, the BoE found that some major lenders now expect total gross mortgage lending in 2015 to be fairly similar to 2014, compared with initial predictions of an increase.
The most recent data reveals that demand for house purchase secured lending dropped substantially in Q1 for the third consecutive quarter, but was expected to rise in Q2.
Mortgage rates continued to fall in the last few months, remaining at record low levels, meaning the overall effective rate on new mortgages decreased in the three months to May.
The most quoted fixed mortgage rates – the rates offered to borrowers – also declined during Q2.
The report claims that in recent discussions, most major lenders do not expect rates to drop much further at lower loan-to-value (LTV) ratios, but some said there is some room for reductions in higher LTV products.
Lenders also said that the availability of secured credit to borrowers with LTVs above 75% rose in Q2, although their desire to lend at LTVs above 90% was unchanged. Market share objectives and a changing attitude towards risk are believed to have boosted credit availability slightly.
The study also found that lenders reported a slight easing in credit scoring criteria and in the future, the availability of secured credit is expected to rise slightly in Q3.
Demand for secured lending for house purchases grew significantly in Q2, according to respondents to the survey, after falling in the past three studies.
Respondents reported a huge rise in demand for prime and buy-to-let lending, and the BoE mentioned the Royal Institution of Chartered Surveyors’ new buyer enquiries balance being positive in Q2.