Mortgage activity has strengthened in 2013, according to the latest report from the British Bankers Association, but high repayments and redemptions mean we are not seeing an increase in net mortgage borrowing on the high street.
Buyers and those remortgaging continue to be attracted by lower rates and easing criteria. Help to Buy is helping first-time buyers and is expected to give a further boost to this group, as well as second steppers, from January when the guarantee element of the scheme is rolled out. Funding for Lending is resulting in ever-lower mortgage rates, while the Bank of England’s comments on forward guidance suggest interest rates are unlikely to rise for a couple of years at least, further instilling confidence.
However, caution continues to prevail as borrowers who can afford to do so continue to overpay on their mortgages, taking advantage of low interest rates and paying down debt where they can. This is sensible: why leave savings languishing in accounts paying poor rates of interest when you can reduce your borrowing? While confidence may be growing in the housing market, there is a reluctance to take on extra borrowing while we still have an uncertain economic and jobs climate.
While lending volumes are improving, we remain some way off a sustained recovery in the housing market as caution continues to prevail and transactions are far lower than they were at the height of the boom years. However, mortgage brokers and estate agents are still reporting a high level of enquiries and we expect these to continue to feed through to improved official figures in coming months.