According to Money and Credit data from the Bank of England (BoE), the amount lent was at its highest point this year with a steady rise from £23.8bn of gross lending in January.
Mortgage approvals for house purchase ticked up slightly by 99 to 66,163 in May while the value of these approvals remained flat at £16.2bn. Remortgage approvals fell slightly from 47,824 in April to 47,770 in May. The value of these approvals was also flat at £10.2bn.
Resilient, healthy market
Mortgage industry officials said the performance of the market in May showed things were still steady despite economic uncertainty.
Richard Pike, Phoebus Software sales and marketing director, said mortgage activity was “bucking expectations” and soaring inflation was not putting people off as predicted.
He added: “There is still plenty of demand to buy and sell but there will come a time, if the Monetary Policy Committee (MPC) continues on its path of raising interest rates to curb inflation, when worries over finances may affect confidence. For now though, with plenty of lender appetite and competitive rates, we are looking at a pretty healthy picture.”
Lisa Martin, development director at TMA Club, said May’s figures indicated a “resilient mortgage market”.
Paul McGerrigan, CEO at Loan.co.uk, said: “What had seemed a dampening of homebuyers’ appetites in April is clearly only temporary and demand for property market is still high, despite tough economic times.”
John Phillips, national operations director at Just Mortgages, added: “Doom merchants who predicted the housing market would fall off a cliff when the pandemic hit were badly wrong. Levels of borrowing and house buying have defied expectations and are now higher than pre-pandemic, although it must raise the question just how much longer can these increases continue.
“We may well see a tail off in house purchases as the cost of living continues to rise, but instead it will drive remortgages as people look to lock into longer term fixed rates to protect them from interest rates that look set to increase several more times yet.”
Interest rates rise
Gross mortgage repayments increased from £12.6bn to £21.8bn in May.
Net mortgage borrowing rose to £7.4bn in May, up from £4.2bn the previous month, and was above the £4.3bn pre-pandemic average recorded in the 12 months to February 2020.
The effective interest rate – the actual interest rate paid – on newly-drawn mortgages increased by 13 basis points to 1.95 per cent in May. The rate on outstanding mortgages also went up by two basis points to 2.07 per cent.
Andrew Montlake, managing director of Coreco, said: “A lot of people want to buy before rates rise even further and the fear of missing out on the rates currently available is incentivising a lot of people to take action.
“Rates are rising at a rate of knots and people are getting in while they can, and fixing for as long as they can, whether through a house purchase or a remortgage. People who have been procrastinating are now very proactive.”
