Demand for mortgages is set to keep rising throughout the next three months, yet supply may be constricted in turn, the Bank of England has reported.
Results from the Bankís Credit Conditions Survey identified a ësignificant increaseí in demand for home loans in the second quarter of the year. This rise in demand for finance is consistent with the booming house market, however plans to cap the coffers put aside for home loans are still believed to be on the cards.
Last week, it was reported that the UK Treasury had bequeathed power to the Central Bank, whereby they could now curb lending through new loan to income rules. Many have called for action to prevent rising house prices in London, where a lack of supply to match demand has spurred many market analysts to forecast that a generation of young workers could be forced to either move away or move to the private rental sector.
A number of politicians and economists alike have called for harsher restrictions on access to the Help to Buy programme and the implementation of higher deposit requirements from mortgage holders in order to achieve a balanced recovery within the housing market.
The housing boom has seen prices in London drive up surrounding house prices in the London commuter belt and nearby suburbs.
Official figures have shown a property price increase of 18.7% in London. Outside of London, the cost of a home was 6.3% up in April 2014 on the same month a year before.
The Council of Mortgage Lenders proposed that mortgage data was shrouded in a ëstatistical fogí at present, due to the disruptive effects of newly implemented stipulations.
Though recent government schemes, such as ëHelp to Buyí, have injected life into a market which was reeling from the financial crisis, the recently devised Mortgage Market Review has been expected to adversely impact the number of approvals made by lenders on their customers secured loan applications.
“Some lenders noted that changes introduced as a result of the Mortgage Market Review might reduce approval rates somewhat,” the Bank said.
“In addition, some lenders suggested that a tightening in lending standards on large loans with high loan-income ratios may also push down their approval rate a little.
However, The Bank of Englandís survey of lenders, carried out last month, found that demand for homes was forecasted to rise by the majority, suggesting that the MMR might not have the expected influence on the countryís demand and supply ratio than previously expected However, the report was quick to stress that whilst demand might be rising, that lenders predict that the number of mortgage applications approved in the next three months will decrease, with supply being squeezed to combat the aforementioned rise in demand.
“Market indicators point to a slowdown in activity levels, in part associated with new mortgage rules, but it is unclear how lasting this will be,” said Bob Pannell, the CML’s chief economist last week.
The new rules are “likely to have disrupted the normal patterns of activity, creating statistical ‘fog’ around the published figures,”.
“As this lifts over the coming months, a clearer picture as to any lasting impact of the MMR rules on lending activity should emerge,” he added