The Bank of England Monetary Policy Committee (MPC) kept interest rates on hold in September, at 0.25%, but all eyes are now on its 2 November meeting to see if it decides to raise interest rates for the first time in over 10 years
The shift in tone of the MPC’s minutes last month was widely noted as being more hawkish.
On the whole, activity in the housing market has built up modest momentum since the start of the year, helped by an increase in first-time buyer numbers. UK Finance estimates gross mortgage lending in September to be £21.4 billion, 5% higher than a year ago. Of this, nearly two-thirds, or £13.7 billion, was carried out by High Street Banks. Stripping out seasonal factors, total mortgage lending is in line with monthly average lending since the start of 2017.
The number of transactions has remained just above 100,000 each month since January, supported by recovering levels of house purchase approvals. According to UK Finance, house purchase approvals data, which covers just over two-thirds of the market, implies we can expect activity to recover a little further as we head towards the end of this year.
Looking at activity over the longer term, there’s been little movement in transactions since early 2014. Within the 100,000 a month average figure, however, the activity mix has changed. Before March 2016, when the stamp duty change on second properties led to a jump in activity, roughly one-in-ten mortgage transactions were by landlords, but in August this year, the comparable figure was closer to one-in-17. Over the same period, first-time buyers have fared better, accounting for a larger proportion of house purchases, helped by government schemes such as the Help to Buy equity loan. Home movers and cash buyers have seen less movement as their share of the market remains unchanged.
More recently though, home mover numbers have shown some signs of growth, helped by low mortgage rates as their debt service costs reach historic lows. Another factor that may have helped home movers is the change to the Prudential Regulation Authority’s macro-prudential policy on loan-to-incomes. This allows lenders to more effectively manage the flow of loans at high income multiples and has coincided with the proportion of home mover loans at or above 4.5 loan-to-income ratio to overtake that of first-time buyers.
On the remortgage side, competition amongst lenders, as well as near record low mortgage rates, has meant more and more home-owners are remortgaging and locking in deals. If talk of the first rate rise in over 10 years continues to gain momentum, we would expect to see growth continue in this part of the market.
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