According to the British Bankers Association (BBA), mortgage approvals dropped for the third straight month in March. Just 41,060 purchase deals were approved, down from 42,247 in February and 44,240 in January, while remortgage approvals dropped to their lowest level since November 2006.
This was then reinforced by data from the Bank of England at the start of the month.
Mortgage Solutions has polled brokers over the last week on why they think the approvals process has slowed in such a pronounced way. By far the most popular answer was the harsher affordability assessments put in place by lenders – almost half of respondents thought this was the main factor, followed by a third putting the blame on uncertainty around Brexit and the upcoming election. Around 10% blamed squeezed household budgets, with the same number pointing the finger at a lack of support for first-time buyers.
Stuart Gregory, managing director of the Lentune Mortgage Consultancy, pointed out that the market is on tenterhooks waiting for the results of the FCA’s review of the Mortgage Market Review. He said: “Lenders are understandably reticent about showing too much leniency on income assessments, so as a result the FCA’s findings are eagerly awaited.”
Gregory suggested that these issues have meant lenders that may previously have been overlooked have instead seen greater interest from intermediaries. He explained: “If anything however it highlights the benefits of many smaller lenders in the marketplace, specifically smaller building societies who continue to support the public, and brokers, by taking a more even approach.”
Adam Hosker, founder of Bespoke Finance, said that the reduced activity seen today is down to a combination of the restricted affordability of homeowners, rising house prices and the constraints placed on the buy-to-let mortgage market by the Government.
He continued: “The perceived attack on landlords has property investors thinking twice; they are having to deal with the removal of mortgage interest relief, an extra 3% stamp duty bill on purchases, PRA rental affordability calculations and portfolio assessments. What’s changed to cool down the market in the South East? Deals no longer stack up for property investors. When rental yield was already tight in high-priced and under-supplied London, the new buy-to-let stress tests can make things seem impossible.”
What about Brexit?
Hosker questioned whether Brexit and the upcoming election are really making a difference. He said: “I am yet to see a client put a purchase on hold due to perceived uncertainty due to democracy. It would be wrong for us to project the unknown of Brexit on the public’s attitude to get on the property ladder.”
Gregory added: “With regard to various political influences on the property market, I do think the general public are virtually at the point of ‘what’s the worst thing that can happen?’ A year does not go past without some form of political interference in the housing market, so it is effectively the new normal.”