It is not exactly a fall in lending volumes but the Bank of England has reported a softening. With an increasing number of people worried about the double whammy of overpriced property and the impact of an interest rate rise, the housing market frenzy seems to be moderating.
The Bank of England said lending volumes rose to the highest amount in the first quarter of the year since Q1 2008 but this was still 8.5 per cent less than Q4 2013.
Borrowers are protecting themselves where they can with more than 80 per cent of new mortgages taken on a fixed basis, giving the borrower the security of a lower rate for a longer period. Even though the average fixed rate edged 2 basis points higher, while variable rates fell on average by 6 basis points, the growing threat of an interest rate rise means the allure of the fixed rate is strong.
The proportion of lending to first-time buyers declined by 0.5 percent from the previous quarter which is perhaps surprising given that the second phase of Help to Buy is well under way. This does reflect the general easing across the market to which first-time buyers are not immune. With £9.4bn of lending done to first-time buyers, compared with £3.2bn in the first quarter of last year, government assistance and the general availability of more deals at higher loan-to-values have made it easier for them to get on the ladder.
The buy-to-let market is going from strength to strength as investors shun poor rates on savings accounts and turn to property. Lenders are offering cheaper mortgages with looser criteria, further fuelling the sector’s expansion.
We are expecting to see a further falling off of lending volumes when the second quarter’s statistics are published as they will cover the period when the mortgage market review was introduced.