Mortgages set to become cheaper and more widely available
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Mortgage availability is set to increase further in the coming months as banks and building societies have become more willing to lend to people with deposits below 10 per cent, a Bank of England survey has found.
The Bank’s latest Credit Conditions Survey, covering the first quarter of this year, found that demand from home buyers for mortgages fell in the first three months of the year, continuing a trend seen since the middle of 2014.
The fall in demand for prime lending was the most significant seen since 2008, with some lenders putting the recent falls in demand for mortgages down to concerns about housing affordability and uncertainty about the outlook of the housing market.
Colin Payne, associate director of Belsize Park-based Chapelgate Private Finance, said: “We’re very busy at the moment but 50 per cent of our business has been from re-mortgages this year. In Q4 2014 it was below 35 per cent and since income levels are roughly the same, this shows that there has been a significant shift in the split between purchases and remortgages.”
But lenders expect demand for mortgages for house purchase, and particularly prime lending, to increase in the coming three months.
Mr Payne said: “The election means that most people have taken their foot off the gas from the purchase side. I think a lot of pent-up demand will be released after the election, particularly in this area at the higher end of the market.”
There were also signs that mortgage rates, which have already been chopped to some of the lowest levels that lenders have ever offered, are poised to edge down further.
Lenders said they expect to see a significant narrowing in their profit margins on mortgages and a further slight reduction in mortgage fees in the next three months.
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A slightly increased risk appetite among lenders is set to boost mortgage availability further in the coming quarter and competition is also being buoyed by lenders looking to meet their market share objectives, according to the report, which surveys banks and building societies every three months to understand lending trends.
It said that lenders reported a slight increase in their willingness to lend to borrowers with a deposit of less than 10 per cent in the first quarter of this year.
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Mr Payne said that over the last week some lenders had relaxed their lending criteria at the higher end of the market, although they had tightened them at the lower end.
He said that this was thanks to a recognition by lenders that the costs of running a property are more or less the same regardless of the price of the property, so higher earners (those earning more than £75,000 a year) are likely to have a higher disposable income. These buyers are now being offered mortgages of five times their salary, compared to previous loan to income caps of 4.5 earlier in the year.