Mortgage lending drops in April as EU uncertainty hits market

New figures from the UK's largest chartered surveyor have revealed that April saw a slowdown in house purchase approvals.

e.surv's Mortgage Monitor reported a fall of just under a fifth in house purchase approvals in April as uncertainty about the EU referendum hit buyer confidence. Mortgage lending also fell, partly as a result of changes to buy to let rules.

The latest figures from e.surv, the UK’s largest chartered surveyor, show that house purchase approvals in April totalled 57,512, a fall of 19.4% from the 71,357 loans granted the previous month. Annually, house purchase lending dropped 14.9% from the 67,594 loans granted in April 2015. This significant fall follows three months where year-on-year lending figures had risen substantially.

Richard Sexton, director of e.surv chartered surveyors, comments: “The mortgage market is entering a more turbulent phase. As lenders steer for safety, three different forces are at work. First and foremost are the effects of the looming EU referendum on confidence and certainty for the UK. Whichever way the result, financial markets could see rapid shifts in the days and weeks beforehand – and especially immediately afterwards.

“Secondly, the lending market is in one sense beginning to return to its normal rhythm after suffering a hangover from the party of buy-to-let activity seen earlier this year. As this excitement begins to wear off, a more normalised lending climate is beginning to reassert itself. Home lending is solid beneath this predicted surface slowdown – but now the headache is by no means over as new economic risks cause understandable caution from lenders.

"The third major break on mortgage lending is a deeper foreboding about the solidity of the UK economy – quite subtle but potentially more major."

Despite the fall in mortgage lending, there were good signs for first-time buyers, as we see next.

Choice of first-time buyer deals helping people onto the property ladder

While there may have been a steep fall in house purchase approvals last month, the number of completed sales to first-time buyers picked-up considerably in March.

The latest First Time Buyer Tracker from Your Move and Reeds Rains revealed that March saw 32,500 first-time buyer sales, up 47.7% from the 22,000 seen in February. Sales to first-time buyers also grew on an annual basis, rising over a third (34.9%) from the 24,100 seen in the corresponding month last year.

Sexton adds: “With the buy-to-let sector finally stepping out of the spotlight, attention is turning to the bottom of the property ladder. This shift has already begun, with the number of deals available for first-time buyers rising quickly, bringing a range of new choices.

"At the moment, first-time buyers don’t appear reluctant to take advantage of new options, whether they be government schemes such as Help to Buy or new mortgage deals.

"Aside from these new choices, savings remains a huge pitfall holding back many homeownership aspirations. For first-time buyers, saving for a deposit can be a massive challenge and hugely intimidating.

"With suggestions that unemployment is beginning to creep up, alongside inflation, this may become even tougher. Hopefully, schemes such as the Help to Buy ISA will be able to counter these difficulties and provide first-timers with a valuable lifeline to secure their dream property.”