UK Finance has reported that in November new Mortgage Approvals fell to their lowest level since August 2016, with a total of 39,507 approvals.
This is a 5% drop and there has been much speculation about the reasons behind it.
The reality is that there were a number of factors contributing to this and as mentioned on LBC radio last night when asked this very question, for mortgage borrowers it is all about psychology and how they feel given the state of the wider economy and how this will affect their personal circumstances.
In November, we finally had the first rate rise in a decade, which although well signposted, saw lenders increasing fixed rates prior to this move which may have deterred some buyers.
Whilst the rise was not great itself, moving up just 0.25% to 0.5% and we are still very much in a low interest rate environment, there was still a whole generation of potential buyers who had never experienced a rate rise before.
If you couple this with the uncertainty around Brexit negotiations and wider economy, this caused many potential borrowers to take stock and adopt a wait and see approach, putting off purchase decisions until the New Year.
There are also a new generation of people who are happier to rent for longer and whilst they all still seem to have the ultimate ambition of owning their own home, there is less of hurry to do so, or in many cases the ability due to a lack of adequate housing that is affordable due to high prices. Saving up for a deposit for example, takes longer now unless you are lucky enough to have parental assistance.
Regulation has also had an effect as far as meeting new affordability calculations is concerned and although the actual mortgage payments are affordable, the stress tests that are now applied are causing some issues.
However, things look brighter for next year as the Stamp Duty concessions will help to further encourage First Time Buyers who had started coming back to the market over the course of 2017, especially as prices seem at last to be dampening with very low digit house price growth, if at all, expected next year.
Remortgage business will also be strong but the main areas that have declined are the Buy To Let market due to the vast array of tax changes and the fact that less people are moving as often due to the difficulty in finding suitable properties at a reasonable price and the cost of doing so in terms of stamp duty.
Contrary to popular belief, mortgage lenders are very keen to lend and have all talked to us about higher lending targets in 2018 which means competitive pressure will keep a good choice of products available, as well as improvements to criteria in terms of more sensible interest only options, more products available for those who are self-employed or working on a contract basis as well as mortgages for older age groups.
The message to everyone would be don’t assume you cannot obtain a mortgage, but sit down with a professional mortgage adviser to look at your options and you may be pleasantly surprised.