There was a slowdown in house purchase approvals last month, according to the latest Mortgage Monitor from e.surv.
House purchase approvals (seasonally adjusted) in April totalled 57,512, down 19.4% from the 71,357 loans granted the previous month. This substantial fall follows a previous three-month average of 72,693 house purchase approvals since the start of 2016.
E.surv said economic uncertainty is playing a role in this drop, as is the new tax regime for buy-to-let purchases.
Annually, house purchase lending dropped 14.9% from the 67,594 loans granted in April 2015. Preceding this year-on-year fall had been annual rises of 20.2%, 17.9% and 14.7% as stamp duty changes caused an uplift in overall lending levels. This also follows unprecedented high lending across the previous quarter, fuelled by buy-to-let borrowing.
Richard Sexton, director of e.surv chartered surveyors, said: “The mortgage market is entering a more turbulent phase. As lenders steer for safety, three different forces are at work. First and foremost are the effects of the looming EU referendum on confidence and certainty for the UK. Whichever way the result, financial markets could see rapid shifts in the days and weeks beforehand – and especially immediately afterwards.
“Secondly, the lending market is in one sense beginning to return to its normal rhythm after suffering a hangover from the party of buy-to-let activity seen earlier this year. As this excitement begins to wear off, a more normalised lending climate is beginning to reassert itself. Home lending is solid beneath this predicted surface slowdown – but now the headache is by no means over as new economic risks cause understandable caution from lenders. The third major break on mortgage lending is a deeper foreboding about the solidity of the UK economy – quite subtle but potentially more major.
“It’s crucial for lenders to manage risks in the coming months. There now looks to be completely different interest rate speculation on the horizon and all eyes will be on the Bank of England to see the next steps taken. With some calls to cut interest rates rather than raise them, lenders will have to remain even more alert to economic conditions. And slowing growth is a further sign which is adding to doubts over economic security in general.
“Despite all these ongoing risks, the underlying core of the lending market appears strong enough to weather such tests. For some first-time buyers, prospects are improving and despite rising house price costs, lenders remain keen to help credit-worthy borrowers get on the property ladder.”
The proportion of small-deposit lending (to buyers with a deposit worth 15% or less of their properties’ total value) climbed in April to account for 19.1% of overall house purchase loans granted – up from 17.1% the previous month. April 2015 saw small-deposit lending comprise just 16.3% of overall house purchase approvals.
April saw, in absolute terms, 10,985 small-deposit loans granted, down 10% from the 12,202 granted in March. However this total was just 0.3% behind the 11,018 small-deposit loans approved in April 2015.
The number of completed sales to first-time buyers picked-up considerably in March. The latest First Time Buyer Tracker from Your Move and Reeds Rains revealed that March saw 32,500 first-time buyer sales, up 47.7% from 22,000 in February. Sales to first-time buyers also grew on an annual basis, rising 34.9% from 24,100 in March 2015.
Sexton said: “With the buy-to-let sector finally stepping out of the spotlight, attention is turning to the bottom of the property ladder. This shift has already begun, with the number of deals available for first-time buyers rising quickly, bringing a range of new choices. At the moment, first-time buyers don’t appear reluctant to take advantage of new options, whether they be government schemes such as Help to Buy or new mortgage deals. Concerns may be being raised about this new variety of offers, and as ever lenders and borrowers should adopt a cautious approach – particularly if the course of interest rates becomes even less certain.
“Aside from these new choices, savings remains a huge pitfall holding back many homeownership aspirations. For first-time buyers, saving for a deposit can be a massive challenge and hugely intimidating. With suggestions that unemployment is beginning to creep up, alongside inflation, this may become even tougher. Hopefully, schemes such as the Help to Buy ISA will be able to counter these difficulties and provide first-timers with a valuable lifeline to secure their dream property.”
