Anyone operating in the mortgage market knows that different metrics can often give different impressions of the market’s health. The Bank of England’s recent mortgage data made for promising reading, with the bank reporting that there were more loans approved in April than in any other month over the past six years. On the other hand, mortgage lending figures for May were not quite so encouraging, indicating that total activity was 3% lower than in May 2014.

Where the market will be in a month, six months and a year down the line therefore looks increasingly uncertain. On the one hand lending could prove resurgent, with the rise in approvals suggesting that consumers will continue to access mortgage finance successfully. While this is certainly positive, policymakers shouldn’t think of this as showing that fears over recent regulations have been overblown. But despite this positive, there are still fears that over-regulation may scupper the recovery.

It is important to bear in mind that the current environment is favourable to the consumer, despite house price inflation. Mortgage rates are extremely well priced thanks the continued rock-bottom base rate and intense competition between lenders. Whether the market would fare so well under different circumstances is questionable. As house prices continue to rise and rates start to do the same, would-be borrowers are certain to face a tougher challenge. 

Market stability is of course important, but regulators have shown in the past that they can be somewhat overzealous in their pursuit of this end. There is a natural tendency to over-regulate, rather than risk being too permissive, but with the Mortgage Credit Directive yet to come into force, further disruption may not be far away. Policymakers need to ensure that signs of life in the market do not cloud their judgement, especially when the full impact of recent controls have not been felt.

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