The final months of 2013 saw mortgage demand rise at the highest rate in six years, raising some concerns over its potential impact on the housing market.
Lenders responded to the Bank of England’s quarterly Credit Conditions survey by identifying a significant increase in the demand of people wanting mortgages.
The survey recorded a balance of 62%, the highest net balance recorded since the survey began back in 2007.
The government’s Help to Buy scheme has boosted demand as a mortgage can now be accessed with a smaller initial deposit.
However, the high prices of homes have not been matched with wage increases, meaning concerns of a housing bubble are still very widespread.
Another scheme, Funding for Lending, was also offering mortgage assistance but the Bank of England announced it would switch the focus of the scheme to business lending.
As a result it means fewer mortgages could be available, although customers can still use the scheme until February should they so wish.
Originally, the scheme was designed to give banks access to cheap finance in the hope that any low costs would be passed on to borrowers.
An increase in demand could continue during the first three months of 2014, while there is also a need to help some people climb on to the property ladder before prices get too much for them.
With prices continually rising, the likelihood is that more people will be forced to rent, something that 15% of the UK market is already doing.
That figure in itself is a record high, while it is expected to reach 20% by 2021, according to official government estimates.
Renting is increasingly common in the UK, as the property market follows in the footsteps of many in Europe, where renting over buying is considered ‘the norm’.
An increase in mortgage lending would suggest that more people are taking risks and that more credit is becoming available as banks relax their criteria.
With a deposit of 10% or less required to gain a mortgage, the housing market is still full of options, but for how long that will last remains to be seen.
If you are thinking about applying for a mortgage in 2014, you might want to consider becoming more frugal in terms of the way you manage your finances.
One of the little things to consider is to cut out overspending and impulse purchases through the use of prepaid cards to help instill this new frugal approach, as you can only spend up to the available balance on your card. This means that, unlike simply using cash, you can develop more control and discipline in your spending.
