Mortgage approvals tick up in Q2: Bank of England

Mortgage approvals tick up in Q2: Bank of England

Mortgage approvals were higher in April and May than the first quarter’s average as mortgage rates remain at historically low levels, according to the Bank of England’s second quarter credit conditions review.

Approvals for remortgaging also increased in the second quarter of this year, although mortgage approvals for house purchase and remortgaging still remain much lower than in the years prior to the financial crisis.

The monthly net flow of mortgage lending increased slightly in the three months to May, however the BOE noted that some major UK lenders expected total gross mortgage lending in 2015 to be broadly similar to that in 2014, compared with expectations of an increase initially.

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The last survey showed demand for house purchase secured lending fell significantly in the first quarter, for the third successive quarter, but was expected to increase in the second quarter.

Mortgage rates continued to drift downwards in recent months, remaining at historically low levels, meaning the overall effective rate on new mortgages fell in the three months to May.

Most quoted fixed mortgage rates, indicating the rates offered to borrowers, also drifted down during the second quarter. With swap rates increasing over this period, spreads over relevant reference rates fell over the quarter.

Again, the report mentioned that in recent discussions, most major UK lenders did not expect rates to fall much further at lower loan-to-value ratios, but some noted there was some scope for reductions for higher LTV mortgage products.

Lenders also reported that the availability of secured credit to borrowers with loan-to-value ratios above 75 per cent increased in Q2, though their willingness to lend at LTV ratios above 90 per cent was unchanged. Market share objectives and a changing appetite for risk were both said to have boosted credit availability slightly.

Lenders in the survey also reported a slight loosening in credit scoring criteria and looking ahead, the availability of secured credit was expected to increase slightly in the third quarter.

Demand for secured lending for house purchase increased significantly in the second quarter, according to respondents to the credit conditions survey, having fallen in the previous three surveys.

Respondents reported a significant increase in demand for both prime and buy-to-let lending, with the BOE also mentioning the Royal Institution of Chartered Surveyors’ new buyer enquiries balance being positive in Q2.