Mortgage demand hits its highest rate in six years

9th January 2014

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Mortgage demand soared to its highest rate since 2007 during the final three months of 2013 according to the latest Bank of England Credit Conditions Survey writes Philip Scott.

Boosted by the government’s Help to Buy initiative mortgage lenders reported that demand for secured lending to finance a house purchase “increased significantly” between the start of October and end of December, with the net percentage balance rising to 62% – its highest level since the survey began six years ago.

Lenders also reported that demand for secured lending for remortgaging increased significantly over the same period.

Competitive pricing and increased promotional activity was also reported to have stimulated demand and lenders expected little change in demand for secured lending in the first three months of 2014 according to the report.

Help-to-Buy was established by the Government in a bid to give those struggling to get on the housing ladder a leg-up.

Under this system, would-be property owners can put down a deposit as small as 5% for homes up to a value of £600,000. Mortgage lenders who sign up to the scheme, pay a fee to the government, which will in turn guarantee 15% of the loan value.

Commenting on the data, Howard Archer, chief UK & European economist at IHS Global Insight says: “Obviously the second stage of the government’s Help to Buy scheme that kicked in from October is a major factor in this.

“This is yet further evidence that housing market activity is gaining substantial momentum, helped by both the Funding for Lending Scheme as well as the Help to Buy Scheme.”

Given the renewed buoyancy in the property market, the Bank of England scrapped Funding for Lending support for households from the start of 2014.

This week Halifax reported that UK house prices fell 0.6% in December but still gained 7.5% year-on-year in the three months to December.

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