29 November 2023
If you are covering the Bank of England Money and Credit statistics or the Mortgage Guarantee Scheme quarterly statistics, please see the following comment from Karen Noye, mortgage expert at Quilter:
Money and Credit statistics
"As we navigate through a challenging phase in the housing market, there are subtle signs suggesting we might be slowly emerging from the worst of the turmoil. However, it's clear that we're not completely out of the woods yet. The latest data reflects that while net mortgage approvals for house purchases have ticked upwards to 47,400 in October, from the low of 43,300 in September, the market remains cautious.
“This uptick, though modest, hints at a resilient segment of buyers gradually adapting to the new normal of higher interest rates and navigating an uncertain economic landscape.
“Despite this, the overall mortgage landscape remains subdued. Gross lending has declined, suggesting that the high-interest environment continues to dampen the enthusiasm for new mortgages. This trend aligns with the cautious optimism in the market - people are still wary, potentially waiting for more favourable house prices and easing mortgage costs. While mortgage rates show signs of stabilising, they remain significantly higher than in previous years.
“What we're witnessing is a delicate balancing act. On one side, there's a persistent demand for housing driven by limited stock and rising rental costs, nudging potential buyers towards purchasing despite the high costs. On the other, the deterrent of expensive mortgages and economic uncertainty is leading many to adopt a wait-and-see approach. This push-and-pull dynamic is likely to keep the market in a state of flux.”
Mortgage Guarantee Scheme statistics
"Following the news last week that the government plans to extend the mortgage guarantee scheme until June 2025, new data shows that the scheme has provided only a moderate impact on the housing market since its launch on 19th April 2021. By the end of June, 39,252 mortgages have been completed under this scheme. However, with the mean value of properties purchased or remortgaged through the scheme standing at £199,245, significantly lower than the national average house price of £287,546, its reach seems limited.
"This gap indicates that first-time buyers, often constrained to loans of about 4.5 times their annual income, face a stark reality. For an average earner, this translates to a borrowing limit just over £150,000, offering limited options in the housing market. Therefore, building a larger deposit or seeking financial help from family sources often becomes necessary to broaden their market choices. The extension of the scheme, though well-intentioned, may not significantly alter the current market dynamics.
"There's also a tangible concern regarding negative equity, especially for those who purchased right at the top of the market. High loan-to-value ratios under this scheme place buyers at risk of negative equity, particularly if the housing market faces a significant and prolonged downturn. Those who purchased at the scheme's average property value might find themselves in a precarious financial situation, burdened by negative equity and restricted mobility in the market. This risk is compounded if they need to sell, as they would have to bear the cost of the negative equity, alongside moving expenses and a new deposit. Therefore, while the scheme aims to assist first-time buyers, it is crucial to balance its benefits with safeguards that ensure long-term financial stability and market resilience against potential downturns."
