Industry reacts to newly published statistics
Net borrowing of mortgage debt by individuals increased to £7 billion in March, up from £4.6 billion in February, the latest Bank of England Money and Credit statistics showed.
The figure remains above the pre-pandemic average of £4.3 billion in the 12 months up to February 2020.
Gross lending also rose, albeit slightly, to £26.5 billion in March from £26.0 billion in February, while gross repayments fell to £19.7 billion in March from £21.0 billion in February.
Mortgage approvals for house purchases were little changed at 70,700 in March, from 71,000 in February, and remained above the 12-month pre-pandemic average up to February 2020 of 66,700.
John Phillips, national operations director at Just Mortgages, said that while approvals remained steady, the spike in net borrowing shows consumers are looking to borrow more than ever.
Meanwhile, approvals for remortgaging, which only capture remortgaging with a different lender, rose slightly to 48,800 in March. The figure remains below the 12-month pre-pandemic average up to February 2020 of 49,500, but is the highest since the February 2020 figure of 52,100.
Read more: Remortgage trends - LMS offers lookback and predictions.
“Remortgage business is the biggest hive of activity at present. People are scrambling to lock into the lowest rates possible and consolidate debt to clear their balance sheets before the inevitable recession hits us,” Lewis Shaw, founder of Mansfield-based Shaw Financial Services, said.
“A boom in remortgaging is underway as borrowers clamour to lock in fixed deals before rates rise even further. The Bank of England remortgaging data only captures deals when borrowers stay with their currently lender so undershoots the ground swell of activity underway,” Simon Gammon, managing partner at Knight Frank Finance, pointed out.
Imran Hussain, director at Harmony Financial Services, said demand for mortgages is still high due to many homeowners looking to remortgage and first-time buyers desperate to get on to the housing ladder.
“Despite the considerable economic headwinds, demand for housing has shown no sign of slowing down yet but the market will be tested during 2022,” Hussain added.
Steve Seal, chief executive at Bluestone Mortgages, noted that while it’s reassuring to see that mortgage lending to individuals has increased given current inflationary pressures, affordability concerns are, and will continue to be, a key challenge for consumers.
“As a growing number of customers are feeling a squeeze on the cost-of-living due to increased utility and fuel costs, as well as a hike to national insurance contributions, we expect to see a growing cohort of customers locked out of the mainstream mortgage market. Our own research found that nearly a quarter of non-vanilla customers have been turned down for a mortgage,” Seal said.
Read more: What percentage of customers are rejected for a mortgage?
Dave Harris, chief executive at more2life, commented that the outlook for the mortgage market is “safe as houses.”
“Alongside enduring demand, the sector is strengthened by growing remortgage activity triggered by the rising cost-of-living and a surge in lenders offering lower rates of interest on five- and 10-year products than on two-year loans,” Harris said.
“In light of the current economic backdrop, we might expect an uptick in borrowers fixing for longer and exploring later life lending, particularly as borrowers can take advantage of strong house price growth through releasing equity to address inflationary pressures elsewhere,” he added.
Richard Pike, sales director at Phoebus Software, said that with a third base rate rise in five months looming, new borrowers and those remortgaging will see rates increasing from historic lows.
“For many people, this is the first time they will be experiencing this and with the rising cost-of-living and soaring inflation, some borrowers will have to tighten their belts,” Pike said.
The Bank of England is expected to raise interest rates again to cap rising inflation.
