Those keeping a close eye on the housing market will not have failed to notice the interesting figures that have been announced for January 2014. A total of 76,947 mortgages were given the green light in the first month of the year, amounting to 4,149 more than were approved in December.
This has confounded the analysts, who estimated 73,500 mortgage approvals would be seen during January. Their predicted slight increase has been surpassed in style, giving us the biggest number of approvals in a single month since November 2007.
Are we close to pre-crisis levels?
Not yet. Just prior to the financial crisis which struck in 2008, mortgages were being approved at the rate of approximately 90,000 every month. Clearly there is some way to go before figures reach those levels. However some who are sceptical of the state of the housing market will be looking at these figures and wondering whether the market itself is starting to overheat.
Low borrowing is fuelling the rise
People have more confidence in the state of the housing market now than was the case some time ago. Furthermore the cost of borrowing is still at a historic low. The Bank of England has still not increased interest rates and this is sure to assist people in affording the repayments on a new mortgage.
Will the figures be tempered by new mortgage rules coming soon?
While January’s figures are a cause for celebration among those looking to buy their first home (or to move into a second one) they may not last. Many are looking to the new mortgage rules that will be introduced after April. This is when affordability measures are to be used to determine whether or not people can actually afford the mortgages they are applying for.
Some experts are gauging that as many as one third of those applying now could be rejected once the new rules come into force. While the rules have been designed to ensure people do not overstretch themselves with a mortgage, some banks and building societies are being accused of being too harsh. Many areas will be looked into, including spending habits, expenses for pets, holidays and even personal grooming.
There is every chance then that we will see two more months’ worth of encouraging mortgage figures before the change takes place. However some would say those who are about to be rejected under the new tougher mortgage rules should not have been approved for a mortgage in the first place. Affordability – or the lack of it – is one of the main reasons so many people got into trouble during the financial crisis. By opting for more responsible lending we should see a better long term picture with fewer defaults. It won’t be good news for those who are rejected under the new rules, but some would argue it is for the best. When interest rates go up – as they surely will – fewer people will get caught in the trap of not being able to afford their mortgage payments.