Peter Williams is executive director of the Intermediary Mortgage Lenders Association
Growth has been put on hold in the mortgage market while the full impact of the Mortgage Market Review emerges.
The new rules have justifiably tightened the screw on lending to ensure it is permanently focused on affordability. Early indications show mortgage activity has temporarily slowed and is clearly following an entirely different trajectory to UK house prices.
There is clearly a major discrepancy between soaring house prices and subdued mortgage activity, arising from the increasing dominance of cash.
Fewer than two thirds of property purchases in the first quarter of 2014 involved a mortgage and we estimate that just 39% of the funds used to purchase these properties were mortgage financed, which represents a new low.
The impact of MMR will be especially significant as it may well control the level of high loan to income lending in future, ensuring that mortgage activity isn’t carried along on the tide of rising house prices.
Higher interest rates, when they come, will also have a natural dampening effect on both housing and mortgage markets.
For now, the Bank may opt to hold fire before taking further action that could have negative ramifications for credit worthy borrowers.
