This we all know is a given. First-time buyer stamp duty exemption is one strong variable that has played a significant part in the mainstream mortgage market in the first quarter of the year.
As ever this was closely followed by some indifferent economic influences. With the second quarter well underway these exemptions have now fallen by the wayside and larger economic shadows have formed over the market.
The word recession inevitably sends a shudder down the spine of all types of business no matter what the sector and also that of the consumer. However, I think it’s fair to say that this announcement has hardly come as any great surprise to lenders or the industry as a whole and the simple fact is that we are – for want of a better expression – far more battle hardened and more robust lending entity than in recent times.
HARD FACTS
March saw the number of UK mortgage approvals increase from February’s figure of 49,000 to 49,900.
This is according to the latest figures from the Bank of England. In addition the CML reported gross mortgage lending to be an estimated £13.4 billion, which represented a 30% rise from £10.3 billion in February and a 17% rise from March 2011.
This data helps to both highlight the effect of the Stamp Duty exemptions as well as underlining the overall relative strength in lending.
It seems inevitable that the April and maybe May figures will see some small drop from these levels. Indeed there already appears to be some evidence of this as figures from LSL/Academetrics have reported that the level of housing transactions in April has plummeted by 18% following the end of the stamp duty holiday.
Only 11,307 loans for properties worth up to £125,000 were reported to have been approved in April down 5% from March, according to figures from e.surv chartered surveyors, and across the overall market the data also added that around 49,165 loans for house purchases were approved, a fall of 1.4% from March.
Again it is important to underline that such figures are hardly unexpected amongst lending circles and harking back to a blast from the past, there are certainly plenty of reasons to shout ‘don’t to panic Mr Mannering’.
Looking closer at the economic factors influencing the current lending arena, the latest quarterly CBI economic forecast suggests that the UK economy will see growth resume in the second half of 2012, with faster GDP growth during 2013.
The CBI expects GDP growth in 2012 will be 0.6%, slightly down from its forecast in February of 0.9%. This is a direct consequence of the preliminary ONS figure for quarter one. Despite this, growth prospects remain broadly unchanged for the latter half of the year and, in 2013, the CBI forecasts GDP growth to be 2.0%.
Quarter-on-quarter growth is expected to be flat in the second quarter of 2012 (0%), affected by the impact of the additional bank holiday for the Diamond Jubilee.
However, there will be an improvement in the second half of the year (0.7%, 0.5%), reflecting an improving global economy and an expected easing in inflationary pressures, plus a slight boost from the Olympics and a bounce back from the second quarter.
While inflation is expected to be somewhat higher than previously thought throughout 2012, in part due to recent oil price rises, it should continue on a downward trend and come close to hitting the Bank of England’s target in the spring of 2013.
REASONS TO BE POSITIVE
Household spending will remain subdued, with weak wage growth and unemployment rising to a peak of 2.86 million in the first quarter of 2013, but prospects should improve next year as inflation continues to fall further and disposable incomes begin to recover.
So there are reasons to be positive. Possibly one of the greater challenges facing the intermediary market is getting this message across to clients and the general public.
An understandable reaction for the majority of households when faced with the word recession is to tighten their belts.
The only problem being that many are already struggling with household budgets and as indicated this will not undergo any dramatic change in the immediate future. But the question remains are they looking in the right places in order to shave pounds off their monthly budgets. Our research still suggests that many aren’t.
REMORTGAGE BOON
A recent report from Which? said that more than a million people will be hit by the standard variable rate (SVR) and variable rate mortgage hikes taking effect adding a collective £300 million to repayments over the next year.
In addition it said that seven in 10 mortgage holders are concerned about an increase in interest rates, while one in seven is already struggling with repayments.
These figures illustrate that one of the primary focal points for intermediary firms in the current economic and lending climate should be the remortgage market.
The fact remains that for many homeowners action can be taken to help reduce monthly outgoings and with the word recession fresh in the minds of homeowners today is the optimum time to engage with new clients and revisit existing clients to help allay any immediate and future financial concerns.
The remortgage market is one which will continue to be the backbone of the intermediary market in this and coming months and will therefore provide decent levels of business for proactive firms to counter any slight falls in overall lending.
