24th September 2015
Housing market activity across the UK continues to flourish according to the latest statistics from the British Bankers’ Association (BBA).
The figures from the trade body showed that gross mortgage borrowing soared at an annual rate of 14% to reach to £12.2bn in August, marking the largest increase since 2008 and the biggest monthly jump since 2010.
The number of mortgage approvals over the month was 23% higher than a year ago, with remortgaging up 38% – at its highest level for four years – while house purchases were up 16%.
The analysis found that existing borrowers are seeking fixed rates to control their mortgage costs, while market competition is also producing attractive deals for new buyers.
Commenting on the numbers BBA Chief Economist Richard Woolhouse said: “People are putting their money into bricks and mortar while interest rates are low and the timing of a likely rate rise remains uncertain. Mortgage borrowing continues to pick up.
“The August increase is the largest in five years, although borrowing is still some way below pre-crisis levels. Remortgaging numbers also continue to be strong, as shrewd homeowners snap up competitive deals.”
Howard Archer, chief UK and European economist at IHS Global Insight asserted that the stronger BBA data reinforced his belief that house prices will see solid increases over the coming months.
He said: “We expect house prices to rise 7% in 2015 and then by 6% in 2016. A significant upside risk to these forecasts is currently coming from the shortage of houses on the market.
“Housing market activity will likely be supported by largely helpful fundamentals, notably including stronger earnings growth, high employment, elevated consumer confidence and still very low mortgage interest rates. Meanwhile, a limited stock of properties for sale is clearly exerting upward pressure on house prices.”
But he warned that the upside for housing market activity and prices is expected to be constrained by more stretched house prices to earnings ratios, tighter checking of prospective mortgage borrowers by lenders and the likelihood that interest rates will start edging up before long.
“However, higher interest rates are unlikely to have a major dampening impact on housing activity for some time to come as the Bank of England is stressing that interest rates will only rise gradually and to a limited extent,” added Archer.
Charlotte Nelson, finance expert at Moneyfacts.co.uk believes that overall it is unsurprising that mortgage borrowing is on the rise.
She said: “Base rate speculation is rife at the moment, but by opting for a low fixed rate deal, particularly over the longer term, borrowers can buffer themselves against any rate rises in the near-future. Many borrowers are therefore seizing the day and grabbing a low mortgage rate while they can.
“Remortgagors in particular are taking advantage of the positive borrowing atmosphere; remortgage borrowing is currently sitting at a four-year high, with many consumers benefiting from low deals. However, these low fixed rate deals will not last forever, and there are already signs that rates are creeping upwards. Borrowers should therefore not wait too long to take advantage of these attractive deals.”