“With loan approvals slowing again during May, it is hard not to conclude that the mortgage market remains subdued by any historical yardstick. The Financial Policy Committee (FPC) is right to voice concerns at any emerging trends which could rock the foundations of financial stability – but it would be wrong to assume that rising house prices automatically mean household debts careering out of control.
“Sweeping caps on mortgage lending would be ill-suited to a climate where cash purchases are rising, mortgage debt is shrinking in real terms and homeowners are putting a combined £10bn of equity into their homes each quarter.¹ Limiting the opportunities for hardworking, creditworthy consumers to buy or remortgage would only amplify the advantages already enjoyed by cash buyers, foreign owners and buy-to-let landlords, particularly in the South where the housing supply shortage is especially acute.
“Coming down heavily on mortgage lending would be like trying to dim the lights by switching off the electrics. There are clear signs that robust income stress tests and underwriting standards under the Mortgage Market Review (MMR) are doing their job, and there is a danger that further constraints would miss their target and create new problems while doing little to control house price inflation.”
¹ IMLA’s report The new macro prudential regime — when and how will the Bank of England intervene reveals:
- Over one in three houses (36%) is being bought entirely in cash, up from 24% in 2007
- The percentage of total housing demand financed by cash reached an all-time high in Q1 2014
- Mortgage debt shrinking is in real terms while borrower quality remains robust
- Early signs of slowdown in mortgage approvals and lending activity suggest caution is needed before imposing further controls.
Andy Lane / Ludo Baynham-Herd, The Wriglesworth Consultancy
Tel: 0207 427 1422 / 29 Email: email@example.com
Notes to Editors
The Intermediary Mortgage Lenders Association (IMLA) is the trade association that represents mortgage lenders who lend to UK consumers and businesses via the broker channel. Its membership of 41 banks, building societies and specialist lenders include 16 of the 20 largest UK mortgage lenders (measured by gross lending) and account for about 90% of mortgage lending (89.4% of balances and 90.6% of gross lending).