Mortgage approval rates are sluggish as Brexit uncertainty slows the housing market.
Lobby Group UK Finance released figures for February showing 39,083 mortgage approvals for house purchases for the month. This is down on the previous month’s figure of 39,910 and up slightly from the February 2018 figure of 38,555.
This is coupled with slow consumer credit growth, up 3.8 percent on the year according to UK Finance, making it the lowest increase since October.
In other mortgage news, the Financial Conduct Authority (FCA) has proposed changes to the way in which lenders assess borrowers’ ability to pay back a loan. It is hoped that this will help those who are unable to switch mortgage lenders, despite having no arrears, so-called mortgage prisoners.
The FCA’s Mortgages Market Study found that although the mortgage market works well, on the whole, new lending rules would help in certain areas.
Remedies have been proposed for the following:
- to speed up lender participation in implementing tools to help borrowers more easily identify which mortgages they can apply for;
- to include mortgage intermediaries in the Single Financial Guidance Body directory to help borrowers make the best choice of broker;
- consultation on changes to mortgage advice rules and guidance to remove barriers to innovation;
- continued in-depth research to analyse why some customers choose not to switch mortgage providers.
Director of Mortgages at lobby group UK Finance, Jackie Bennett said of the Mortgages Market Study: “We agree with the findings of the FCA’s final Mortgage Market Study report that the mortgage market is, on the whole, working well. Lenders have been working closely with the regulator, responding to the challenge of so-called “mortgage prisoner with a voluntary industry-wide agreement which has already seen firms contact over 26,000 customers. The regulator’s offer of more flexibility around affordability testing is encouraging. This will help those customers who are up to date with payments or who are not looking to borrow more.
“Requiring inactive lenders and administrators of entities not authorised for mortgage lending to review their existing customer books to identify and contact eligible customers is a positive step. However, even under these proposals, there are thousands more customers with inactive lenders or unregulated owners that the regulated industry would be unable to help. We therefore call on the government to work with the FCA to ensure that all customers, regardless of owner, have full regulatory protections to ensure they are treated fairly.
“The report also recognises the diversity within the mortgage market which has continued to develop. In recent years, lenders have made considerable strides in contacting customers both pre and post the end of a fixed term, making it easier for people to switch on to a new rate. In 2018, this accounted for nearly £150bn of product transfers with just over half of customers taking advice when they do a product transfer. We, therefore, look forward to contributing to the further consultation on advice and the consumer research as to why customers do not switch. “
Why do you think borrowers fail to switch to better deals?
