According to the Council of Mortgage Lenders, the number of loans approved for remortgaging in May 2014 dropped 26 per cent in volume and 16 per cent in value compared with the same month in 2013.
Compared with the previous month lending for remortgage purposes was down 18 per cent in number and value compared to April 2014. The value of these loans in May totalled £3.3bn.
David Hollingworth, associate director at London & Country Mortgages in Bath, said the figures could be a seasonal blip but could also be a manifestation of the introduction of stricter mortgage lending criteria.
He said: “Remortgaging is often triggered by borrowers looking for a better deal or wanting to extract equity in order to improve their home. The fall is notable although it could be seasonal.”
“With rates likely to increase though, borrowers need to look around now rather than leave it too late. You would hope the remortgaging figures could go up as the autumn starts up again.”
However the CML noted that the monthly number of buy-to-let loans was up 4 per cent in May with value up by 5 per cent. Compared to May 2013, there was a 14 per cent increase in number of loans and a 22 per cent increase in overall value.
The CML said the fall was not a result of the impact of MMR which introduced stricter mortgage lending criteria in April and denied the figures were the start of a longer term trend.
Paul Smee, director general of the CML, said: “With May lending figures, we get our first glimpse at the effect the Mortgage Market Review has had on lending trends and, at least so far, the impact appears subtle, rather than dramatic. First-time buyers and home movers continue to be
“Key drivers in market growth and their activity does not seem to have been noticeably disrupted. There was no cliff edge; lenders and intermediaries had been methodically working towards applying MMR changes for months leading up to implementation and the figures appear to reflect this.”
Figures out last week also showed a fall in UK construction output during May. The Office for National Statistics said private sector house-building stagnated and commercial work fell during the month.
Construction output dropped by 1.1 per cent in May after rising by 1.2 per cent the previous month.
Steve McGuckin, UK managing director of the global construction consultancy Turner & Townsend, said the surprise reversal of April’s growth came as a timely reality check for the construction industry.
“The booming residential sector has been the engine of the wider construction industry’s growth, and with demand still strong it has plenty of road left to run.
“Even if house prices are close to peaking in the South East, sales are robust and house builders are unlikely to suffer much in the short-term. Many construction firms have over two years’ worth of orders on their books, and more than enough momentum to keep building.”
“In fact a plateauing of house prices could be a good thing - it should reduce the inflationary pressure of off-plan speculative purchases and allow the industry to rebalance to build a wider range of properties.
