Gross mortgage advances reached £51.5bn in quarter four of last year, the highest amount advanced in a quarter since Q3 2008, according to the Bank of England.
The Bank also said that an increasing number of borrowers are worried about the threat of an interest rate rise, with more than 80 per cent of mortgages taken out in Q4 2013 on a fixed-rate basis. However, another reason for the migration towards fixed rates is the fact that they are so cheap: they may have edged up slightly in the past few weeks but in Q4 2013 the average fixed rate fell to 3.25 per cent.
The proportion of lending to first-time buyers increased as borrowers took advantage of the early introduction of the second phase of Help to Buy, and lenders who are not participating in the scheme extended their range of high loan-to-value products. The value of loans advanced to first-time buyers hit the levels last seen in the third quarter of 2007, illustrating that this important sector of the market has well and truly returned.
Buy-to-let lending also continued to pick up, as investors shunned poor rates on savings accounts, choosing instead to invest their money in property. With rental yields higher than savings rates, and lenders offering cheaper mortgages with looser criteria, it is no surprise that the buy-to-let sector continues to expand. Of course, this makes it harder for first-time buyers to get on the housing ladder as they are competing with landlords for property and in cities such as London there is limited supply in the first place.
The mortgage market has continued to perform well into this year, with plenty of competitively priced products available. However, the Mortgage Market Review will be introduced next month and there are fears that this will make it much harder to get a mortgage. While we believe there will be a slowdown as lenders ensure everything is functioning as it should be, many of them have already introduced the changes so it should largely be ‘business as usual’ for good quality borrowers who don’t have issues with their credit history. It will also provide a welcome boost for brokers who will be able to interpret the new rules and guide borrowers through them.