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Bank of England: Mortgage borrowing reaches five-year high in February

Individuals secured an additional £6.2 billion in mortgage borrowing in February which is the strongest level since March 2016, the latest Bank of England (BoE) figures have revealed.

The latest data showed it was not just net borrowing which was buoyant last month, but there were also a high number of approvals.

The 87,700 approvals, although down on the peak of 103,700 in November 2020, were still well above the monthly average in the six months to February 2020, which was 67,300.

The BoE Money and Credit report for February 2021 also reported approvals for remortgages with a different lender increased slightly from 32,600 to 34,300 between January and February.

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When it came to gross borrowing the figure reached £27.7 billion which was very close the March 2016 figure of £27.9 billion.

The BoE data also revealed the ‘effective’ rate – the actual interest rates paid – on newly drawn mortgages increased by six basis points to 1.91% in February.

It said this was slightly higher than the rate in January 2020 (1.85%), and compared with a series low of 1.72% in August 2020. The rate on the outstanding stock of mortgages remained at series low (2.09%).

The BoE thought the strong borrowing figures were caused by the flurry of activity as buyers rushed to meet the original stamp duty holiday deadline of 31 March.

But John Phillips, national operations director, Just Mortgages and Spicerhaart said thought there were other influencing factors at play.

He said: “This is only part of the story. A year on from the start of the first lockdown, what is clear is that the pandemic has spurred people into action.

“Whether it is those looking to move for more outside space. Or the lack of commute meaning some are choosing to leave the city, in a year where our lives were turned upside down, priorities were shaken up.

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“With the extension to the stamp duty holiday, the reintroduction of 95% LTV mortgages and the furlough scheme running till September, the property market should keep moving at a pace and we may see records broken for the first quarter of 2021.”

Meanwhile Jonathan Sealey, CEO of specialist short term lender Hope Capital, said the figures were also testament to the hard work of everyone involved with the property and mortgage industry.

“All those involved in the sector should take credit for that, and initiatives such as virtual viewings and the introduction of new products during the lockdown, have contributed to the property market staying operational,” he said.

“It’s also been an opportunity for specialist lenders particularly who have been able demonstrate the agility and speed that sets them apart from high street lenders, in ensuring people can get their deals over the line, no matter what else is happening.”

By Kate Saines

Source: Mortgage Finance Gazette

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More Mortgages Agreed by Lenders in Early 2021

Mortgage commitments agreed by lenders were a quarter more at the end of 2020 than at the end of 2019, the private investor platform Hargreaves Lansdown has highlighted.

Advances actually paid in the fourth quarter of 2020) were also up on the same quarter a year earlier, but this time by only 4.2 per cent. In the year as a whole they were unsurprisingly down by 9.8 per cent.

The value of balances in arrears rose by 3.4 per cent in the last quarter and is now just under 1 per cent of all mortgage balances.

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‘The race for space has turned out to be more of a marathon than a sprint’, said Hargreaves Lansdown personal finance analyst Sarah Coles.

‘We’ve been snapping up mortgages at the fastest rate since the onset of the financial crisis – and that was even before we knew the stamp duty holiday would be extended.

‘The mortgage market was booming at the end of last year, and the mortgages being agreed for the start of 2021 were at their highest for 14 years’.

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Meanwhile, arrears are starting to grow, said Coles. But ‘let’s not get ahead of ourselves, arrears are still incredibly low: right now they’re at 0.93 per cent compared to 3.64 per cent in early 2009. However, during the pandemic millions of borrowers have been able to rely on payment holidays, so have been able to avoid paying without running up arrears. Now that support is winding down, anyone who’s still struggling is running out of road. When the FCA asked people in October, 19.6m expected to be struggling to pay the bills or service their debts by April. By the time we get the March figures, arrears could look much worse’.

Source: Landlord Knowledge

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Mortgage borrowing remains high in January – Bank of England

Net mortgage borrowing remained at £5.2bn in January, according to the Bank of England’s Money and Credit statistics for January 2021.

This is up from the monthly average of £4bn in the six months to February 2020.

The statistics also show that there were 99,000 mortgage approvals for house purchase in January, in line with the average of 100,000 since October 2020.

In addition, effective interest rates on new mortgage borrowing fell to 1.85% in the first month of the year.

That is in line with the rate in January 2020, and compares with a series low of 1.72% in August 2020.

The rate on the outstanding stock of mortgages fell to 2.09% which is a new series low.

David Whittaker, chief executive of Keystone Property Finance, said: “Today’s statistics show that the housing market remained resilient as the New Year kicked off, with demand for property continuing to rise as people take advantage of low interest rates and the stamp duty holiday.

“However, it’s clear that mortgage transactions are beginning to slow as the impact of the third national lockdown on consumer confidence and uncertainty about the future of the stamp duty holiday takes hold.

“In addition, while demand for property has remained strong, data shows that the supply of new property has decreased since the beginning of the year.

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“As well as navigating this unprecedented market, buy-to-let borrowers have an added challenge of dealing with recent and upcoming regulatory changes.

“As such, the value of advice for landlords cannot be understated.

“The role of mortgage brokers has never been more important in helping landlords understand this shifting landscape and find the right mortgage for them and their individual circumstances.”

Joshua Elash, director of property lender MT Finance, added: “There is an astounding level of liquidity in the market at a time when the economy itself is in a state of partial paralysis. It is unusual and feels dysfunctional.

“Consumer borrowing is down, as lockdown continues to bite into people’s ability to go out, shop, and enjoy the things in life we usually take for granted.

“This new reality has meant that households continue to deposit savings at remarkable levels, given that interest rates are at historically low levels.

“Net mortgage borrowing is also robust, encouraged by the stamp duty holiday and effective interest rates as low as 1.85%.

“With the Chancellor rumoured to be rolling out a mortgage guarantee scheme, which will see the return of higher loan-to-value deals, this trend will continue, leading to serious inflation in property prices.”

Islay Robinson, group chief executive of Enness Global Mortgages, said: “These latest mortgage approval numbers highlight a market at its most buoyant in the month of January since before the financial crisis of thirteen years ago.

“Activity is far higher than normal levels and this has no doubt been driven by the current stamp duty holiday.

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“Homebuyers are shrugging off any fears of a pandemic property decline in their rush to secure a stamp duty free purchase.

“This frenzy looks likely to continue until summer, given Rishi Sunak’s potential pending announcement of an extension via Wednesday’s budget.

“The question for sellers, estate agents and mortgage brokers is, ‘what happens once the levy is reinstated?’

“We may be about to take a step back from the cliff-edge should the stamp duty holiday be extended.

“However, this is only prolonging the inevitable and, if anything, will only steepen the gradient of any potential market decline.

“We should perhaps make the best of these ‘sunny days’ whilst we can before another stamp duty deadline countdown leaves us teetering on the edge once again.”

Iain McKenzie, chief executive of the guild of property professionals, added: “Despite January traditionally being a slower month for purchasing a home, these figures show the stampede to buy property before the stamp duty holiday ends.

“It is good news for the wider economy that there is still interest in moving up the property ladder and consumer confidence in mortgages is still robust.

“Consumers are also repaying debts at an incredible rate, which can be partly ascribed to the savings that many employees are making by working from home.

“However, this could also indicate a lack of confidence in how the economy will fare this year, as people are choosing to pay down debts rather than spending the extra cash.

“Interest rates on mortgages are some of the lowest we’ve seen in a long time, and this could be another strong year for the housing market.”

By Jake Carter

Source: Mortgage Introducer

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Mortgage options hit highest level since first national lockdown

With lenders continuing to gain confidence, homebuyers and investors seeking mortgages now have the highest level of mortgage options available since March 2020.

Lenders recently launched a range of new mortgage options for property buyers. Currently, there are 3,215 mortgage deals available, according to Moneyfacts. This is the highest number in 11 months, when there was 5,222 deals available on the market.

In the first half of 2020, mortgage options fell sharply. Many lenders withdrew mortgages while they reassessed the level of risk they could take in the wake of the COVID-19 pandemic. In particular, borrowers with smaller deposits had few mortgage deals available.

During the second half of 2020, the mortgage market started recovering. Since October, the number of mortgage options has grown by 42%. This is the biggest four-monthly increase since 2007 .

Additionally, at the end of 2020, mortgage approvals were at the highest level since 2007. The housing market remained busy as homebuyers and property investors have been rushing to beat the stamp duty holiday deadline.

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Mortgages with smaller deposits available

Choice in mortgages is particularly increasing for borrowers with smaller deposits. In the past few months, the most significant rise was for 90% loan-to-value (LTV) mortgages. This LTV mortgage where borrowers only need to put down a 10% deposit is typically used by more first-time buyers.

Eleanor Williams from Moneyfacts says: “Those with 10% deposit or equity might be especially pleased to note that this tier has, for a second month, seen the largest uplift in availability.

“With products at this level often favoured by first-time buyers and traditionally being seen as higher risk for providers, willingness to extend lending in this risk bracket could be an indication that lenders have confidence in the sector, despite ongoing, wider economic uncertainty. This is echoed by the average two and five year fixed rates at 90% LTV seeing the largest fall of all the lending tiers, reducing by 0.09% and 0.07%.”

Mortgage interest rates stabilising

Average interest rates have increased across all LTVs. However, the average rate has increased only fractionally, which shows rates are stabilising. This is likely due to increased competition in the mortgage market. It also shows lenders are gaining more confidence and less risk averse than before.

Eleanor Williams comments: “At 2.53%, the two year fixed overall average rate is now 0.11% higher year-on-year, while the five-year equivalent at 2.73% is equal to where it sat in February 2020.

“Therefore, while these rates have risen again, the increases are of just 0.01% and 0.02% this month, which may be a sign of the start of some stability in the market, especially when compared to the drastic monthly increases witnessed over the course of last year.”

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Choosing the best deals

Moneyfacts advises borrowers to take into account a number of factors when choosing a mortgage deal. Don’t look at just the interest rate. It’s important to also take product fees and incentives into consideration.

Recently, two-year fixed products have been particularly popular. Two-year fixed deals typically have lower interest rates than five-year fixed deals. However, for some, the five-year option could be a better choice in the long run. And the interest rate gap between two and five-year fixed rates mortgages has dropped to its lowest level since 2013, according to Moneyfacts.

As the economy and mortgage market remains uncertain, five-year fixed deals could provide longer-term stability. However, this depends on the borrower’s needs. Seek independent financial guidance to find the best mortgage deal for your circumstances.

By Kaylene Isherwood

Source: Buy Association

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Mortgage Lenders Show Confidence, A Research By MoneyFacts Has Found

There are now more mortgage deals available than since the start of the Coronavirus pandemic began impacting the UK economy last March, MoneyFacts has reported.

Its latest UK Mortgage Trends Treasury Report, found that there are currently 3,215 mortgage deals available, the highest number yet since March. Then there were 5,222 deals in the market.

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The biggest rise in deals over the last few months is in 90 per cent loan to value deals.

While average mortgage interest rates have risen across all LTVs, the average for two and five year 90 per cent LTV fixed mortgages fell month-on-month from 3.65 per cent and 3.79 per cent in January to 3.56 per cent and 3.72 per cent in February respectively.

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‘Those with 10 per cent deposit or equity might be especially pleased to note that this tier has, for a second month, seen the largest uplift in availability. With products at this level often favoured by first-time buyers and traditionally being seen as higher risk for providers, willingness to extend lending in this risk bracket could be an indication that mortgage lenders have confidence in the sector, despite ongoing, wider economic uncertainty’, said Moneyfacts’ Eleanor Williams.

‘This is echoed by the average two and five year fixed rates at 90 per cent LTV seeing the largest fall of all the lending tiers, reducing by 0.09 per cent and 0.07 per cent’.

Source: Landlord Knowledge

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Brokers say COVID-19 has reshaped borrower demand

Research from Masthaven Bank has found that the COVID-19 pandemic has reshaped demand from borrowers.

The survey of 265 intermediaries found that customers’ priorities when looking for both lenders and types of property changed significantly over the course of 2020.

Flexible lending criteria is now a bigger priority for customers than before the start of the pandemic, according to 79% of brokers.

Other factors which have significantly increased in importance are customer service (63%), speed (60%) and flexible product features (55%).

Conversely, 56% of brokers said that low rates are no more important now than before COVID-19 and 54% said the same about low fees.

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This emphasis on the importance of flexible lending criteria could be attributed to the fact that 92% of brokers said that their customers had been negatively financially impacted by COVID-19 in the second half of 2020.

Over a quarter of brokers (26%) say they expect to see more business in 2021 from borrowers who have been financially impacted by COVID-19, whether that involved taking out a mortgage payment deferral, being furloughed or being put on the government jobs support scheme.

An additional 20% said they expected to see more business from borrowers with an impaired credit history.

The research also highlights changing attitudes among customers when looking to move home, with 57% of brokers saying that homebuyers are now prioritising bigger houses to allow space for home offices and a third saying that their customers were prioritising a move out of a city to a quieter area.

Close to a third of brokers (32%) said that more outdoor space was the priority for their customers.

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Rob Barnard, director of intermediaries at Masthaven, said: “The coronavirus has affected every aspect of our lives for almost a full year now and looks likely to remain with us for a while longer.

“It’s perhaps no surprise then that borrowers have re-evaluated what is important to them when it comes to seeking out mortgage providers and the homes that they live in.

“Clearly the fact that many people were forced to stay home for extended periods of time and adapt their houses into offices, gyms or schools, has brought into clearer perspective what they really want when it comes to property.

“This once in a lifetime event could have a long-term impact on the UK’s property industry.

“Borrowers have also been clear about what they want from lenders. With so many being impacted by the pandemic, customers are looking for lenders who have a flexible approach and can meet their needs.

“The stamp duty holiday deadline has also undoubtedly increased demand for speedier transactions, while customer service, which has always been a crucial part of any business, has taken on new importance and become an essential duty for lenders. It’s important that lenders listen to their customers and adapt accordingly.”

By Jessica Nangle

Source: Mortgage Introducer

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Mortgage approvals at record levels in 2020

Mortgage approvals surged in December to a four-year high, data published on Monday showed.

According to UK Finance, the banking lobby group, house purchase mortgage approvals by the main high street lenders rose to 46,815 in December from 44,058 in November, the highest number since August 2015. Analysts had been expecting the figures to remain largely flat, at around 44,000.

Gross mortgage lending across the residential market was £22.2bn in December, bringing the total for 2019 to £265.8bn, 1.1% lower than 2018’s figure. A total of 982,286 mortgages were approved, a 7.4% increase on the previous year.

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Howard Archer, chief economic advisor to the EY ITEM Club, said mortgage approvals would have been “significantly lifted by increased confidence and reduced uncertainties” following December’s general election.

He continued: “Prior to November, mortgage approvals for house purchases had fallen back for three successive months to be at a seven-month in October, indicating that activity was being pressurised by heightened uncertainties over the domestic political situation and Brexit.

“Housing market activity, and possibly to a lesser extent prices, could be given a modest lift in 2020 if the government introduces specific measures aimed at boosting the sector in the Budget. Furthermore, mortgage interest rates are at historically low levels; indeed there is clearly a real possibility that the Bank of England could cut interest rates in 2020.

“However, the economy still looks set for a pretty challenging 2020, so the upside for house prices is likely to be limited. Furthermore, Brexit concerns could very well pick up again as 2020 progresses, due to concerns over what will happen at the at the end of the year if the UK and European Union have failed to reach agreement on their long-term relationship.”

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Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The jump in mortgage approvals in December likely solely reflects the stimulus provided by the sharp fall in mortgage rates in the second half of last year; the additional boost to approvals from the result of the general election is still to come. All the evidence so far points to a further rise in demand after the election. The new buyer enquiries balance of the RICS Residential Market Survey leaped in December to its highest level since January 2019.”

UK Finance also said that credit card spending rose 7.3% year-on-year to £11.8bn in December, with repayments continuing to offset spending, meaning the overall level of borrowing through cards grew at a slower rate of 2.4% annually.

Personal borrowing through loans was 14% higher year-on-year, while overdraft borrowing eased 0.8%.

Previously the British Bankers Association, UK Finance represents more than 250 firms.

By Abigail Townsend

Source: ShareCast

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Low deposit mortgage deals at six-month high

The mortgage market has shown signs of recovery as the number of 90% loan to value (LTV) products reached a six-month high while overall choice has improved.

The number of low deposit mortgages almost doubled from 72 to 160, according to a Moneyfacts report.

However, those who require a 90% LTV mortgage still have fewer options than those with more money to put down. Borrowers who qualify for an 85% LTV mortgage have 439 products to choose from and 75% LTV borrowers have 629.

In total, there are currently 2,893 residential mortgages on the market, the most recorded since April 2020 when there were 3,192 mortgages available. This is up slightly from the 2,782 on the market last month.

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Rates on the up

The average rate for a two-year fixed mortgage across all LTVs rose for the sixth month in a row by 0.03% to 2.52%, the highest average rate since January 2019.

The average two-year fixed rate is also 0.08% higher year-on-year and a 0.53% rise on the record low seen in July. The record low rate coincided with a period when there were just 70 high LTV products on the market, where higher rates are typically seen.

The average rate for a five-year fixed deal across all tiers also increased in January from 2.69% to 2.71%. However, this was lower than the average rate of 2.74% during the same month last year.

As well as returning to the market to serve borrowers with a smaller deposit, lenders also appear to be treating those in need of a 90% LTV more favourably by reducing borrowing costs.

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The average rate for a two-year fixed mortgage at this tier dropped from 3.79% to 3.65% over the month while a five-year fix fell from 3.92% to 3.79%.

Eleanor Williams, spokesperson at Moneyfacts, said: “Following the sharp drop off in availability in 2020, it is positive to see we are beginning 2021 with the total number of mortgage deals rising for the third consecutive month.

“Not only is the increase in product choice a positive for borrowers, but it seems that a measure of competition may have started to return to some sectors as well.”

She added: “This improvement in options for mortgage borrowers has occurred at a time when high levels of borrower demand have been fuelled by those hoping to benefit from the stamp duty holiday and by those who re-evaluated what they want from a home and were part of the unleashed demand that arose after the first lockdown in 2020.”

Written by: Shekina Tuahene

Source: Your Money

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Mortgage approvals reach to highest level since 2007

The number of mortgage approvals in November 2020 increased to the highest level since August 2007, according to the Bank of England Money & Credit data.

The number of mortgage approvals reached 105,000 in November, with net mortgage borrowing also increasing to £5.7bn.

In addition, effective interest rates on new mortgage borrowing ticked up to 1.83%.

Household deposits increased by £17.6bn in November, however there were significant withdrawals from national savings and investment accounts according to the data.

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Bank borrowing by small and medium-sized businesses was noted at £1.8bn, while net borrowing by large businesses was £0.2bn.

Tomer Aboody, director of property lender MT Finance, said: “The Bank of England figures provide further confirmation of the prevailing strength and confidence in the housing market, with the highest mortgage approval levels and further borrowings in over a decade.

“Households are looking to maximise space in their current homes by extending, converting lofts and refurbishing, as more time is spent at home.

“With mortgage rates so low, taking advantage of existing equity in homes has enabled people to borrow more for living expenses as they also deal with concerns over future employment and income, with so many industries affected by the pandemic.

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“Household deposits have increased with people saving, due to not being able to go away, out for dinners or even shopping.

“Consumers are being frugal with their spending and considering the threat of a possible recession on the horizon.

“How the government will look to tackle any forthcoming concerns with the Budget, the end of furlough and stamp duty relief will be interesting, since this new wave of the virus has come as a surprise and therefore further potential assistance is desperately needed.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, added: “Not surprisingly, the mortgage market improved considerably at the end of the year but we shouldn’t look too closely at these figures because they reflect a period of particular improvement in market activity of the previous few months.

“Moves have slowed since although many are still trying hard to take advantage of the stamp duty holiday, which will be ending very soon.

“The likelihood of further lockdown restrictions will bring short-term pain to the market which hopefully won’t be reflected in reduced values.

“Certainly the greater availability of a vaccine, on the other hand, will provide some optimism.”

By Jake Carter

Source: Mortgage Introducer

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Bank of England: Loan values rise by 2.9% annually in Q3

Despite a decreasing share of high loan-to-value (LTV) borrowing, mortgage lending remained strong in Q3 with the outstanding value of residential loans up 2.9% compared to a year earlier.

The Bank of England’s (BoE) latest quarterly mortgage lending data revealed there were £1,527.3 billion of mortgages outstanding at the end of Q3.

Meanwhile the value of new mortgage commitments – which is lending which has been agreed to be advanced in coming months – went up by 6.8% when compared to the same quarter in 2019. It reached £78.9 billion, according to the BoE, which is the highest level since 2007.

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The value of gross mortgage advances during the quarter was down 14.7% on Q3 2019 at £62.5 billion.

What’s more the proportion of mortgages advanced during the quarter with LTVs of 90% or more were 3.5% which is 2.4 percentage points lower than a year ago.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “This is no real surprise with many lenders pulling back from this market, and it is only just starting to recover, which is good news for first-time buyers in particular.”

Commenting on the rest of the data he added: “The Bank of England figures show a strong lending market, as we have seen on the ground, with new commitments for the coming months some 6.8% higher than a year earlier.

“There is plenty of business in the pipeline which is working its way through as buyers try to take advantage of the stamp duty holiday. As long as they use good advisers – a mortgage broker and a switched-on solicitor – this should be possible, despite some scaremongering that they are already too late.”

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A ‘precarious’ market

But Karen Noye, mortgage expert at Quilter, thought today’s data painted a ‘precarious’ picture of the housing market at the moment.

“The market is clearly burning bright thanks to the fuel poured on it as a result of stamp duty cut but whether the fire can keep blazing is yet to be seen,” she said.

“The continued increase in house prices is likely to be unsustainable and if the stamp duty holiday is dropped in March and significant economic headwinds as a result of the pandemic start to bite, we may see a very different picture with borrowing and lending being significantly curtailed.”

Noye thought the fact the value of new commitments had increased by as much as 6.8% was ‘worrying’ and ‘should ring alarm bells’.

“While it would be foolish to draw comparisons between the mortgage market now and the one back when the financial crash hit in 2008, we are dealing with unchartered waters and it is worth proceeding with caution,” she said.

By Kate Saines

Source: Mortgage Finance Gazette

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