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Mortgage applications up as Bank of England delays rate hike

Posted by: In: Real Estate 14 Nov 2014 Comments: 0 Tags: , , , , , , , , , , ,

Photo: James Stringer

Mortgage applications from homebuyers and remortgaging homeowners reached their highest point of 2014 during October, according to the National Mortgage Index from Mortgage Advice Bureau.

Total applications via brokers were up 13% in October compared with September to record double-digit growth for the second successive month, having also risen 13% from August to September.

October’s monthly total was up 21% year-on-year and 3% higher than in March – the previous peak of 2014 and the final month before the Mortgage Market Review (MMR) took effect.

The data indicates consumer appetite for mortgage finance remains strong despite reports of cooling house prices and tighter affordability checks. Applications for Jan-Oct 2014 were up 32% on the equivalent period of 2013 and have now exceeded the 2013 year total by 11% after passing this milestone in October.

Remortgage applications during October were up 17% in the month and 34% year-on-year, while homebuyer applications were up 11% in the month and 17% year-on-year.

Gross mortgage lending for next year is now expected to grow by approximately 10 per cent, with remortgaging a key driver of activity.

Speaking to FTAdviser, Nigel Stockton, Countrywide’s financial services director, predicted that mortgage lending would increase from circa £205bn in 2014 to £215-220bn in 2015.

“Some of this will come from increased remortgage activity, as a bank base rate rise looks increasingly likely, but I also expect some transaction growth albeit at modest increases to 2014 and predominantly outside of London.”

The Bank of England’s anticipated rise in interest rates continues to loom large over the lending landscape. While many are opting to fix rates to avoid being hit by the potential hike, though, the Bank’s November report (published this week) reassured borrowers that persistent economic headwinds would likely keep rates low for longer than expected.

“Given the likely persistence of the headwinds weighing on the economy, when Bank Rate did begin to rise, it was expected to do so only gradually and to remain below average historical levels for some time to come,” said the Bank.

Brian Murphy, Head of Lending at Mortgage Advice Bureau (MAB), comments: “Although less positive news for savers, many mortgage borrowers stand to benefit from a delayed Bank Rate rise. Consumers are currently enjoying historically low mortgage rates, and the news that the Bank Rate is not expected to rise until autumn 2015 gives homeowners on variable deals an extended window of low monthly repayments. Combine this with wage growth finally exceeding inflation, and the picture is starting to look a little brighter for borrowers.

“Lending conditions are certainly increasingly favourable. Thanks to fierce competition between lenders – who have regained a healthy appetite for business – there are a record number of products currently available on the market, leaving potential buyers with a whole host of competitively priced mortgages to choose from.

“There is certainly no need for consumers to worry,” adds Murphy. “The Bank of England has made repeated assurances that interest rate rises will be limited and gradual, and the Bank Rate is likely to remain low for some time. Mortgage lenders have long been stress-testing loans to ensure borrowers can afford their repayments both now and in the future, so any increases in monthly mortgage repayments shouldn’t spell financial trouble.”

UK, Mortgage Desk

Source: The Movechannel


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