MortgagesAug 11 2014

MMR is ‘gentle dampener’ on market: CML

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by

The Mortgage Market Review is acting as a “gentle dampener” rather than a hard brake on house purchase demand, with lending levels set to rise modestly over the course of the year, the Council of Mortgage Lenders has said.

CML’s June data reveal that the mortgage market is driven primarily by lending for house purchase as opposed to remortgages.

Total gross lending in June grew by 6 per cent to £17.9bn, up 20 per cent up on June last year, according to the Bank of England. Over the quarter, gross lending totalled £51.4bn, up 11 per cent on the first quarter and 23 per cent on the second quarter of this year.

Among monthly highlights was a 7 per cent increase in first-time buyer loans compared to May, and 19 per cent up on June 2013. Lending to home movers also grew in June, up 4 per cent on the previous month and 11 per cent on June last year.

Buy-to-let lending grew 5 per cent over the month to £2.2bn in June, though the number of loans was the same as May at 15,600.

Over the quarter there were fewer remortgages than in either the previous quarter or Q2 2014, and by value, remortgaging was 2 per cent down on the first quarter, but 5 per cent up on Q2 2013.

In the second quarter of 2014, remortgage lending saw a decrease with the number of loans totalling 74,600, down 5 per cent on the previous quarter and a year-on-year decline of 8 per cent. By value, the loans totalled £11.3bn, down 2 per cent on the previous quarter, but up 5 per cent in comparison to the second quarter of 2013.

Paul Smee, director general of the CML, said: “For the second month running since new FCA rules took effect, lending characteristics remain similar to the market beforehand. We now feel confident that, as we would hope, the MMR effect is more gentle dampener than hard brake.

“As we recently suggested in our revised forecasts, lending levels should continue to increase modestly over the course of the year, driven mostly by house purchase but with remortgaging also recovering.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, described the subdued mortgage market as “surprising”, when taking into account the “excellent rates available and the threat of an interest rate rise”.

He said: “One can only assume that homeowners are either struggling to remortgage because of MMR or think it will be difficult, so aren’t bothering to apply in the first place.

“Lenders have been cutting buy-to-let rates and easing criteria in an effort to ensure lending volumes are not too dented post-MMR because buy-to-let doesn’t come under its remit.

“Investors are benefitting from cheap mortgage rates, less strict criteria and plenty of demand from tenants looking for decent property to rent.”