Mortgage borrowers have turned cautious amid current and future financial challenges, Propertymark claims.
The estate agency trade body has issued a stark warning about the prospects for the mortgage market after Bank of England data showed lending is down but borrowers are paying more in interest on their home loans.
The Bank of England’s latest Money and Credit report showed net borrowing of mortgage debt decreased to £4.4bn in April, from £6.8bn in March, falling below the previous six month average of £5.1bn.
Secured gross lending also decreased slightly to £27.5bn in April from £28.7bn in March, the Bank of England said.
The average interest paid on newly drawn mortgages also increased to 4.08 per cent in April from 4.03 per cent in March.
Nathan Emerson, chief executive of Propertymark, said demand has already been dampened by Middle East tensions and economic concerns in the UK.
Now that Ofgem has announced that household energy prices will rise, Emerson warns that many individuals and families may be facing additional financial pressures.
He said: “This may steer some people to apply a more cautious approach regarding spending habits and could impact both the mortgage market and the wider economy across the forthcoming months.”
There is some hope for the mortgage market though as the Bank of England data shows net mortgage approvals for house purchases – an indicator of future borrowing – increased to 65,900 in April, from 64,000 in March.
Richard Pike, chief sales and marketing officer at Phoebus Software, said: “While the recent volatility has no doubt affected buyer confidence, there are signs that affordability pressures are beginning to ease as economic conditions improve.
“With governor Andrew Bailey also indicating the Bank of England could allow inflation to remain above target to support the economy, the indicators are that rates are beginning to stabilise. This should hopefully see market activity pick up again over the coming months.”
Even against a backdrop of ongoing political and economic turbulence, attitudes towards affordability, property values and moving home remain remarkably consistent
Jason Tebb, president of property website OnTheMarket, was cautious, highlighting that these figures reflect decisions made in the earlier stages of the conflict in the Middle East when buyers may have been keen to take advantage of competitive mortgage rates they had managed to secure.
But he added: “It also demonstrates the ongoing resilience of the housing market and the recent holds in base rate from the Bank of England should further help reinforce this sense of stability.
“Our own property sentiment index suggests that buyers and sellers continue to adapt to market conditions. Even against a backdrop of ongoing political and economic turbulence, attitudes towards affordability, property values and moving home remain remarkably consistent.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, was also optimistic.
He said: “Affordability concerns remain but more than a dozen lenders cut their mortgage rates last week, which will assist borrowers, and it is hoped that the Bank of England will continue to hold base rate steady at least for now.
“Remortgaging numbers were broadly unchanged, suggesting that borrowers may be opting for the ease of sticking with their existing lender when coming to the end of their current deal, rather than shopping around for a new one with a different lender.”
Marc Shoffman is a freelance financial journalist
