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The FPC Should Avoid Restricting Mortgages Further

Wednesday, 25 June 2014

  • Lender Criteria and now the MMR already Restraining the Market
  • House prices in 9 out of 12 UK Regions Still Below Previous Peaks

Ray Boulger, of leading independent mortgage adviser John Charcol, makes the case for why tomorrow’s Bank of England Financial Stability Report should refrain from further restricting mortgage availability.

“Mortgage approvals dipped in April and are now less buoyant than the Bank of England’s expectations at the beginning of the year. The Mortgage Market Review (MMR) is clearly the main factor for the April dip and at John Charcol we are finding that on average it is taking a fortnight longer to get mortgage offers today compared to pre MMR.

“Below is a table showing the number of mortgage approvals since the beginning of last year, when they started to pick up strongly, to the latest figures, which are for April. These are the actual numbers, which are included on the Bank of England web site but have not been referred to up to now in its monthly press releases, which have only quoted the seasonally adjusted figures. However, from publication of the May figures the Bank’s press releases will include a link to the actual numbers, referred to as “non seasonally adjusted,” which will make it much easier to access those figures as well.




  2013 2014
Jan 37,248 53,513 (+43.7%)
Feb 45,103 60,394 (+33.9%)
Mar 55,510 72,476 (+30.6%)
Apr 61,829 65,689 (+6.2%)
May 68,683  
Jun 65,188  
Jul 70,221  
Aug 64,266  
Sep 67,172  
Oct 75,817  
Nov 71,958  
Dec 52,619  




  2013 2014
Jan 22,575 31,275 (+38.5%)
Feb 27,456 32,641 (+18.9%)
Mar 31,856 36,259 (+13.8%)
Apr 34,170 31,260 (-8.5%)
May 33,744  
Jun 31,757  
Jul 36,813  
Aug 34,279  
Sep 35,683  
Oct 40,305  
Nov 36,288  
Dec 28,276  


Source: Bank of England (real figures, i.e. not seasonally adjusted)


“The British Bankers Association has today released figures for mortgage approvals by its member banks for May. These provide an early indication of the trend in the more comprehensive Bank of England data. Again, looking at the actual numbers, the BBA May approvals were 4.2% up on April but despite this small increase they were still 5.2% down on March. Meanwhile, remortgage approvals fell off a cliff, with the May number 29.1% down in March.

“In 2013 the BBA reported a 34.1% increase in purchase approvals from March to May and a 10.4% increase in the remortgage numbers. Although the numbers for 2013 were boosted by a market gathering steam in the first half of 2013, the dramatically weaker numbers comparing March to May this year with last year, both for purchases and remortgages, clearly reflect the impact of the MMR.

“Purchase approvals will be the Bank’s main focus and as the attached table shows the month on month increase in 2014 v 2013 has declined since the beginning of the year and fell sharply in April. Furthermore, whereas April approvals in 2013 were 11.4% up on the previous month, in 2014 April was 9.4% down on March. May approvals are likely to also reflect the significant slowdown caused by the MMR. Remortgage approvals show a similar pattern but these are obviously much less relevant in terms of any impact on house prices.

“Three other reasons the FPC should refrain from curtailing the mortgage market are:

· There is now clear anecdotal evidence that the only region where one can legitimately argue there is a bubble, i.e. London, is now cooling and the 18.7% increase in London recorded in the latest ONS figures (for April) is likely to be the peak for this cycle, with the year on year figure declining from May. As a result of the time lag from a market change to that change being reported in housing completions the house price indices don’t yet reflect the slowdown in London but the FPC will be well aware of it.

The latest LSL Acadametrics house price index (the only index including 100% of housing transactions) regional figures show that house prices have exceeded their previous peak in only three of its ten regions in England and Wales (London, the South East and East Anglia).

· Halifax/Lloyds and RBS/NatWest have announced a restriction of 4x income in the maximum they will lend where the mortgage amount exceeds £500,000 and Halifax and Nationwide have restricted Help to Buy 1 mortgages (the new build equity share scheme) to First Time Buyers. These two lenders are by far the largest two in this market, with Halifax having a 50% market share. If lenders announce their own mortgage restrictions, whether or not there has been any political pressure to do so, there is less reason for the FPC to recommend to The Chancellor any mandatory restrictions.

· The FPC has to set policy for the whole of the UK and its fundamental problem is the same as the ECB’s in setting policy for the Eurozone - one size does not fit all.

“The seven regions of England and Wales where prices are still below their late 2007 or early 2008 peak and the percentage below the peak are:

· North -7.3%

· North West – 7.0%

· East Midlands-3.6%

· West Midlands -2.9%

· Wales – 7.4%

· Yorkshire & Humber – 6.4%

· South West – 0.9%

“Furthermore, these figures do not allow for inflation and so in real terms the falls over the last 6 or 7 years are even higher. Prices in Scotland and Northern Ireland are also still below their peaks, with Northern Ireland prices around 50% lower.

“Where house prices are still below previous peaks any action to curb mortgage lending risks pushing homeowners who have recently come out of negative equity back into it and delaying the move back into positive equity for others. This also has implications for the strength of bank and building society balance sheets as the better the LTV on their mortgage lending the less capital they are required to hold against such loans.

“By the time of the September FPC meeting the impact of the MMR will be much clearer, and the house price indices will be reflecting the slowdown in London. By then it will be much easier to make a sensible judgement on whether any action is required.”

Borrowers should contact John Charcol on 0800 71 81 91 or visit

For further information, please contact:

Ray Boulger

020 7933 9691

07977 277431

Your initial consultation is obligation free.  There will be a minimum fee for our service of £450, of which £150 is payable when you apply, and we will retain the commission from the lender.  Alternatively, you can choose the fee only option which is typically 0.65% of the amount borrowed.  The precise amount will depend on your circumstances and loan amount, and will be discussed and agreed before you make an application. 


John Charcol is a trading style of Towergate Financial (West) Ltd which is authorised and regulated by the Financial Conduct Authority.  Registered in England No: 02292688. Registered office: Towergate House, Eclipse Park, Sittingbourne Road, Maidstone, Kent ME14 3EN.

House price data on a quarterly basis provides the clearest indication of overall market trends, smoothing out the monthly volatility caused by the reduced number of monthly transactions used to calculate all house price indices.

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