Buyers rushing to beat Brexit: mortgage approvals increase

In this month's edition, we take a look at why mortgage approvals increased last December and confounded market expectations, even with Brexit looming ever closer. 

We also investigate why 2018 was the best year for renters in a decade and there's news on an increase in both housing supply and demand, according to recently released statistics. 

Buyers rushing to beat Brexit: mortgage approvals increase

 

Research from chartered surveyor e.surv has shown that mortgage approvals reached a peak of 66,390 in December of last year, which amounts to a 7.8% annual increase. This seasonal rise has led to claims that there is a pre-Brexit rush to purchase property, and that the political uncertainty arising from the imminent break with Europe is actually fuelling current demand in the property market.

Commenting on the figures, Richard Pike, sales and marketing director for Phoebus Software, said:“It is hard to talk about anything at the moment without mentioning the ‘Brexit’ word: it is all-consuming and there is little doubt that it continues to affect the housing market.

“The fact that house purchase approvals were up in December suggests that people are planning ahead and making their move before the March deadline. Interestingly the number of remortgage approvals took a dip compared to the same month in 2017, which bucks the trend throughout the rest of the year.”

“Nonetheless, I would expect it to be the remortgage sector that will be keeping the mortgage market going in the coming months, as we wait to see how our exit from the EU pans out.”

Throughout the year, the types of mortgages being approved also reflected the influx of first-time buyers in the property market, with mortgage products offering loans at 95% of a property’s value increasing in popularity.

Data showed that over a quarter of mortgages approved in December were taken out by borrowers with a small deposit (less than 20%), and this was also the case in November. A key step-change in property has been the introduction of government schemes in order to alleviate the headache of saving for a deposit, and these statistics show that this is having some success in the marketplace.

Tony Sutton, managing director of mortgage brokerage group Specialist Financial Services, said lenders have become more competitive as they seek to protect their market share.

Mr Sutton said: "There is a wider choice of products available, serving a broader range of people with more sensible underwriting decisions.

"Lenders are trying to maintain market share and have increased the terms they are willing to offer."

Such an increase in mortgage offerings has clearly made the process of gaining a mortgage easier than ever before – with some lenders even offering 100% mortgages on properties in an effort to maintain their place in the marketplace. With more options available offering more flexibility, it is no wonder that mortgage approvals have increased, which bodes well for the year ahead for property.

2018 was the best year for renters in a decade

 

After ten years of increasing rental prices, 2018 bucked the trend and was the first year since the global financial crisis of 2008 to record a decrease in average rents – great news for renters across the country. Data and analysis produced by The Deposit Protections Service (DPS), a government-backed group that supervises tenancy deposits, showed that the average rent fell by &9 (1.17%) to &765 per month. With wages increasing by 2.83% on average throughout 2018, renters should be finding their properties even more affordable thanks to the confluence of increasing wages and decreasing rents.

The data showed that the average percentage of wages spent on rent dropped to 31%, according to the DPS Rent Index. Of course, this changes regionally with London continuing to have the most expensive rents in the UK at &1,924 pcm, 69% above the national average, and the North East the most affordable at &529 pcm. These differing rents must also be noted in the context of differing wages – with the average London wage more than &10,000 higher than the national average income of &28,677.

Julian Foster of Computershare Investor Services, which produced the annual report for DPS, had this to say on the analysis produced: “This first drop in average annual rents for almost 10 years is good news for UK renters, especially if wages continue to climb in 2019.”

This fall in rent had certainly not been forecast, in fact, quite the opposite had been expected following new higher taxes on mortgaged buy-to-let properties. With the Tenants Fee Bill also due to be passed into law in the summer of 2019, renters could find themselves having to pay even less in terms of rental fees and penalties. This heady combination could signal a much more affordable, and therefore fluid, rental market in the UK with more people able to save for a deposit to buy their own property whilst renting, and others able to afford to move out from living with family and rent their own property.

In terms of the property market, 2018 proved to be an exceedingly interesting year, with political instability unable to shake the market to the extent previously predicted. During this relatively stable period for the housing market, wage growth rose at its fastest rate since 2008, with inflation simultaneously dropping to 2.1%. Naturally, this is welcome news for renters who should find themselves with slightly more disposal income than was previously the case – great news for the economy as a whole and for the property market.

Housing supply and demand both on the up

 

If you’re of the mindset that the property market is in the midst of a period of difficulty, then the latest figures from the National Association of Estate Agents (NAEA) will surely change your mind, with both the supply of housing and the demand for housing at increased levels proving the market’s current health.

The NAEA Propertymark’s latest figures have shown that the supply of available housing increased by 20% in December. The number of properties reached the highest level for December since 2014, with housing supply per branch increasing to 42 – an increase from 35 per branch in November. Simultaneously, the number of house hunters also increased by 8% in December, with overall demand up 13% year-on-year.

Mark Hayward, chief executive at NAEA Propertymark, said: “This month’s findings prove that despite the current political climate, people still want to move. There is movement in the market with demand from house hunters up 13% year-on-year, and the supply of available properties also rising. Although the number of sales agreed hit a 12-month low, this is something we always see in December, with Christmas festivities typically taking priority over any plans to buy or sell.

“While many are adopting a ‘wait and see’ strategy until there’s further clarity over what Brexit might mean for the market, there is choice for those who want to buy now, and there are people on the market looking for new homes.”

First-time buyer sales also showed an increase in December, with the number of properties sold to the group increasing to 24%. With first-time buyers integral to the health of the property market, rising statistics in terms of their buying potential is always a good indicator of the viability of the market.

As we move further into 2019, it is difficult to predict whether the health of the market will remain consistent in the face of political instability and the financial effects of this lack of consistency. On the other hand, there are other macroeconomic conditions which are favourable for the health of property across the country, such as historically low-interest rates and the relative ease to obtain mortgage credit. These conditions mean that more people than ever are in a position to take out a mortgage and purchase a property, with schemes also available to alleviate the trouble which some find in saving for a deposit, and this increased demand should shore up the market even after Brexit has (or indeed, hasn’t) taken place.