Expected interest rate rises, new borrowing criteria under the Mortgage Market Review and loan-to-income restrictions being implemented by some lenders “could leave good applicants by the wayside and dim the lights of the recovery”, according to one mortgage commentator.
David Newnes, director of Your Move and Reeds Rains, was speaking in the wake of yesterday’s (29 July) Bank of England Money and Credit report, which showed a sharp increase in UK mortgage approvals in June.
Mr Newnes said: “The government needs to make sure an olive branch is still extended to those who may not have access to the ‘Bank of Mum and Dad’, and prevent dampening the demand at the bottom end of the market which remains the engine driving recovery in many parts of the country beyond London and the south-east.”
Mr Newnes noted that the mortgage market has slowed in recent months, as it fine-tunes to new regulations and affordability checks.
However, he added: “Higher LTV lending has enjoyed a renaissance thanks to the introduction of Help to Buy, opening up the options available to aspiring homeowners.”
Richard Sexton, director of e.surv chartered surveyors, stated that a “temporary log-jam” in the market was beginning to clear, with lending returning to sustainable volumes.
“Lending slowed slightly after MMR was introduced, as banks adjusted to lengthier advisory sessions and longer processing times. “Demand is still high among first-time buyers in particular, and high loan-to-value lending hit a post crisis peak in June.”
Mr Sexton noted that more borrowers are being forced to take out proportionally larger loans while wage growth is slow and house prices continue to rise, putting pressure on younger and first-time buyers.
He said: “Increasing house building, thereby limiting house price rises, would reduce the number of buyers resorting to high LTV loans. We must go to the heart of the matter and fix the supply shortage, rather than imposing lending caps to limit the effects of rising prices.”
Zoopla research on sentiment in the housing market revealed that while UK homeowners are confident that property values will continue to rise over the second half of this year, they are concerned about mortgage availability as a result of new lending criteria following the MMR.
Amongst the 7,810 homeowners surveyed, 40 per cent said that securing a mortgage is now harder than it was three months ago.
Zoopla’s head of communications Lawrence Hall added that: “Securing a mortgage appears to be getting harder now that MMR has caused lenders to be more rigorous with their lending criteria and approval process.”
