October’s requested borrowing figures and the number of consumer enquires have seen something of a dip.
This is in direct contrast to a summer which appeared to show encouraging signs of a loosening up of the mortgage market, with average mortgage borrowing amounts and consumer mortgage enquiries growing month-on-month.
The average mortgage borrowing amount for October was £132,285 a drop of 21% on September’s figure of £160,000. At first glance this seems a fairly dramatic drop, but when we compare it to October 2009’s figure of £137,000, the dip is less pronounced.
Anglia, North East England and Scotland saw the largest drops of 47%, 28.85% and 28.64% respectively.
Anglia’s huge drop is something of an anomaly and reflects a readjustment following a particularly large increase in September and some smaller increases over the previous two months. It happens frequently that a sudden extreme rise is followed by an equally dramatic fall and vice versa.
The only borrowing that has remained level in October was in the Midlands, with the average requested borrowing amount standing at £126,628.
What must be remembered is that these figures reflect the initial borrowing amounts that consumers are requesting, which may of course see further adjustments as they take advice and move more progressively along the mortgaging trail.
These initial amounts are indicative of the amounts that consumers think they can borrow before seeking advice and so reflect the amount they think their house is worth plus any additional borrowing that they might ideally like to take out for home improvements, for example.
In addition to this fall of requested borrowing amounts, October also saw a reduction in the numbers of consumers requesting mortgage advice.
This is a seasonal drop that we experience every year at this time, following the schools going back and in the run up to Christmas. Ironically, this drop also comes at a time when adviser demand for new clients is high and this has been reflected in a relatively small but significant average increase of £1 in the cost of a lead, bringing the overall average lead price to £14.00 per lead.
Leads in in Wales are currently commanding the highest average price of £14.77 per lead and leads in Northern Ireland continue to represent the best value in terms of price at £10 per lead.
The reductions that we are seeing this month in average borrowing amounts and lead volumes are likely to be in part seasonal as October traditionally does always see a drop in both these key indicators marking the start of the winter slowdown.
However, it is possible that the slightly larger reductions we have seen in last month’s figures could additionally be an effect of Chancellor George Osbourne’s recent Comprehensive Spending Review.
With the threat of deflation, further cuts and public sector redundancies in particular weighing heavily on consumers, it appears that they are less keen to extend their mortgage. Those that are, are being more conservative about the amounts that they want to borrow than they have been throughout the summer or are less keen to reload their mortgages with non-essential home improvement borrowing.
However, caution should always be taken when interpreting turning figures; a month does not make a trend and, although we would always experience a slowing of the mortgage market in the run up to Christmas, we expect the usual surge in pent up demand in January and February.
It will be interesting to follow the further effects of the government’s Spending Review as a unique influencer on behaviour over the forthcoming months, as requested borrowing figures in particular are a key indicator of consumer confidence.
