The Council for Mortgage Lenders have announced a glowing increase in mortgage activity year-on-year for March. Does this represent a storm of people rushing for funding before the Mortgage Market Review ("MMR") provisions came in or is this a representation of how there is an air of financial confidence and prudence in the minds of sellers and buyers alike?
New loans to home-owners increased by 17%, loans to first time buyers by 24% and to home-movers by 11%. Mortgage lending was £15.3 billion in March, up 27% compared to March last year. If you accept what lenders are saying that they have been growing their mortgage books steadily and have been applying the provisions of MMR in advance of their formal introduction on the 26th April 2014, then we could be witnessing an era of better educated, better prepared and more financially prudent buyers and home-owners. If this is the case MMR will merely become a storm in a tea cup.
Only a few weeks ago people were concerned about not getting a mortgage because of the introduction of the MMR regulations. Under the new rules, your mortgage application is the subject of a "stress test" and a much more intrusive approach to affordability.
This means that every time you use your bank card you will leave a footprint on your bank statement, and when the lender reviews this they will look closely at your spending habits, social life, recreational activities and interests in sport to name a few.
The Director General of the CML, Paul Smee commented when announcing the numbers that it will be some time until we can assess the effects of MMR. The industry was ready for the transition, and already actively implementing many of the changes prior to April. We do not anticipate prolonged disruption to the market as a consequence. I think he is right.
It is sometimes very easy to look back to those dark old days of 2008 and for the government, the Bank of England, the Financial Conduct Authority and lenders to pat themselves on the back for introducing responsible lending criteria. What is more important though is to congratulate the sellers and buyers who have adapted their lives throughout years of uncertainty and crisis so that when the time came they could meet whatever criteria was introduced to enable them to secure an affordable mortgage and make that all important move.
It will be interesting over the coming months to see what figures are reported by the Council for Mortgage Lenders. My feeling is that sellers and buyers have prepared well and will not, provided lenders and regulators are sensible, have anything to fear from lending criteria. As we go into what has traditionally been the busier half of the year for transactions, the next two-to-three months will be a clear indicator of whether the borrower has gone far enough or whether the lenders and regulators are going too far.
I am going to make my prediction early. The MMR regulations will prove a storm in a teacup because sellers and buyers will have prepared better than they are ever given credit for.