This is some way down from the froth of 2007 where we saw a historic peak of £360bn. The question is, how much of this reduction is down to supply and how much is down to demand?
Undoubtedly, the continuing low base rate environment considerably reduces the incentive for many homeowners to change lender to get a better deal, and goes some way to explain why re-mortgaging is around the a third the level of 2006/7.
In contrast, demand from first-time buyers (FTBs) remains high. A recent report from the CML found that 81% of British adults hope to be home-owners in ten years time, and 74% aspire to it within two years.
It is clear then that, despite all the economic and financial difficulties stemming from the credit crunch, for lenders with the appetite (and balance sheet) to lend, there remain some significant opportunities in the UK mortgage market.
It is also clear that other lenders take our view that FTBs and other customers with smaller deposits can still represent excellent lending prospects – the number of products available at 90% LTV or above has increased by nearly 50% compared to 2011.
Earlier this year HSBC committed to make at least £15bn in mortgages available in 2012, with £3bn specifically for FTBs.
During the first months of the year demand was driven by the prospect of the end of the FTB stamp duty holiday. HSBC approved £1.2bn for first time buyers in Q1, an annual increase of 18% and an average of £19m per day.
The lending has continued beyond March. We approved more than 15,000 first time buyer mortgages in the first five months of the year.
We expect to build upon this success during the remainder of the year and recently raised the maximum loan to value on new build properties to 85%, allowing those with a 15% deposit to apply for a mortgage against a new build property.
We will continue to offer competitive rates while staying true to our strategy of funding mortgages almost entirely from deposits and rarely using the wholesale markets. It is a strategy which has proved successful ever since we started selling mortgages in the UK.
Peter Dockar is head of mortgages at HSBC.
