After gloomy figures about September's plunge in mortgage lending from the Council of Mortgage Lenders, tentative hopes have picked up for the market.
The Mortgage Advice Bureau is reporting this morning that October was the busiest month for mortgage applications since before the financial crisis.
While a major caveat is that MAB reports only on applications and not on approvals, the company – using data from 500 brokers and 800 estate agents – said that mortgage application activity was up by 22% on September and was 31% higher than the start of the year.
Another big caveat is that the flurry of mortgage activity was driven by remortgaging, rather than loans for house purchase – and first-time buyers are still being left out in the cold.
However, although overall figures were only 2% ahead of October last year, MAB said the increase in activity last month suggests the Government’s Funding for Lending scheme is now filtering through, enabling lenders to compete for business with lower rates and the launch of new products.
Despite this, lenders’ caution shows no signs of abating, with demand for bigger deposits: average deposits on applications for house purchase rose almost 2% to £63,779, and the size of loan applications remained almost static – decreasing 0.1% to £144,331 in October.
Brian Murphy, head of lending at Mortgage Advice Bureau, said: “There’s been a surge in mortgage applications in the last month, especially for remortgages, and activity levels are at their highest since immediately prior to the financial crisis.
“The increase is partly seasonal, but has been boosted by the impact of the FLS. Average rates on two-, three- and five-year fixed rates have all come down, and the number of products offered has increased. Applications for fixed rate deals continue to increase and are now almost 20% higher than this time last year, suggesting borrowers are looking to lock into these competitive rates to protect themselves against rate rises in the future.
“However, as yet the effects of the FLS have not translated into higher LTV lending, as banks have to set aside more capital for higher risk loans.
“For the market to return to full health we still need to see more being done for those at the lower end of the housing market.
Meanwhile, according to the RICS, buyer demand rose at its fastest rate in almost three years during October, says the latest RICS housing market survey.
The RICS also said that the number of homes coming on to the market increased, with supply rising at its highest rate since April 2011.
Prices across the UK continued to stabilise, with falls slowing for the third consecutive month.
Ian Perry, RICS housing spokesperson, said: “The number of potential buyers going out and viewing property saw a welcome boost last month.
“It seems that with Christmas around the corner, those who are in a position to buy decided to get out there and see what is available.
“That said, overall activity is still very low in most parts of the country and what the market desperately needs is for this to translate into actual sales.”