Net mortgage borrowing up 50%
There was one figure that leapt off the page in the recent housing stats from the Bank of England for John Phillips (pictured), national operations director at Just Mortgages.
He explained that the most interesting figure was the increase of over 50% in net lending in March.
“Net mortgage borrowing increased from £4.6 billion in February to £7 billion in March, according to the Bank of England, and this has got many scrambling for an explanation and understanding of what it means for the rest of the year,” Phillips said.
As we know, there is a lag between approvals and completions of several months, but looking back Phillips said that although mortgage approvals rose from 26,400 in October to 29,100 in November, this has dropped back over subsequent months.
“So, if there has not been a notable increase in the number of mortgages being taken out it means the amount being borrowed per transaction must have increased significantly,” he added.
Read more: Mortgage lending figures drop in April
He went on to say that when looking at feedback from Just Mortgages’ network of brokers, it revealed an interesting trend in the remortgage market - remortgages have not increased significantly, but the amount being remortgaged has.
Phillips explained that with steady house price growth over the past year, borrowers are looking to unlock the value in their homes.
“This is driven in part by those working from home improving their new ‘office’ environment - but has also been spurred on by increasing the bank base rate,” he said.
With a real fear that the chancellor’s warning that rates could hit 2.5% by the end of the year could come to fruition, Phillips said that those wanting to release equity in their homes are scrambling to do so before mortgage rates rise throughout the rest of the year.
“Our belief is that although house sales will remain robust throughout the remainder of 2022 it is remortgages that will be the star of the show for the final half of the year,” he added. According to Phillips, brokers need to be on top of the criteria and products available in the remortgage market and should be reaching out to their client database to highlight the window of opportunity that exists to remortgage at attractive rates before further rate rises throughout the year.
Read more: Remortgage market to become increasingly important in 2022
Meanwhile, Rachel Springall, finance expert at Moneyfacts, said that it is a positive to see mortgage lending remaining buoyant at a time where both mortgage interest rates and the cost-of-living are creeping up.
Lenders are increasing both variable and fixed rates which means it will be more expensive for borrowers who have waited since the start of the year to secure a deal.
“However, with several base rate rises fuelling the market and more interest rate rises expected to come, it would not be too surprising to see borrowers rush to secure a new deal,” Springall said.
House prices are still on the rise and Springall believes that this could price out some would-be buyers or mover-uppers in the months to come, as she explained that their chances of securing an affordable home hinges on the supply and demand of housing.
Affordable housing remains limited and unless this changes drastically, Springall said that house prices are unlikely to fall any time soon.
“Investors considering buying property to let may also be re-thinking their options, considering tax changes and uncertainties surrounding rising costs both for them and for renters,” she concluded.
