The number of loan approvals for house purchases rose by £1bn in December compared with the previous month to £12.4bn, according to Bank of England figures out today.
This is reflecting what we are seeing in the marketplace. The Government’s Funding for Lending scheme continues to make more money available at cheaper rates to lenders, and this is trickling through to borrowers.
We are also seeing welcome innovation return to the market, which should continue to boost the numbers taking out mortgages in coming months. Clydesdale’s ‘low-start mortgage’ whereby borrowers can take an interest-only loan of up to 80 per cent LTV for the first three years, before switching to a repayment facility, is likely to be popular and imitated by other lenders.
Barclays’ Family Springboard Mortgage, also launched this month, enables parents to offset their savings against their child’s mortgage without actually handing over the funds, enabling the child to buy with just a 5 per cent deposit. More innovation like this will really help boost the housing market.
The private banks continue to be the ‘go to’ option for wealthy borrowers requiring large loans, particularly those with complex income arrangements or who require interest-only mortgages. Those who are asset rich but income poor they also find a solution.
The number of homeowners remortgaging fell slightly in December compared with the previous month which is surprising, given the raft of excellent rates now available. However, the numbers were still higher than the previous six-month average indicating an upwards trend nevertheless. Some borrowers will no doubt be waiting to see whether mortgage rates fall further before taking the plunge and remortgaging – the way things are going, you wouldn’t bet against that happening.
In its Trends in Lending report, the Bank notes that rates on fixed-rate mortgages at lower LTV ratios fell by more than 50 basis points over the second part of 2012 and that some major lenders expected a fall in pricing at higher LTV ratios in 2013. This is already happening, albeit slowly, but is good news for those with more modest deposits.