Lenders urged to consider affordability as borrowing returns
Lenders have been warned to prioritise affordability for mortgage and credit borrowers, after a rise in borrowing activity in November.
According to the latest Bank of England data, net mortgage approvals and net borrowing of consumer credit both rose in November. There were 50,100 home loan approvals in November, compared to 47,900 in October; while remortgaging approvals increased to 27,000, from 24,000 the previous month.
Consumer credit borrowing amounted to £2bn in November, up from £1.4bn a month earlier.
The rise in borrowing coincided with a drop in inflation, which led the Bank of England’s Monetary Policy Committee to pause further rate rises.
However, credit experts have warned that lenders should exercise caution when meeting demand for mortgages and consumer loans.
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Paul Heywood, chief data and analytics officer at Equifax UK, said that the focus should be on affordability and improving access for those in greater need of credit solutions.
“With interest rates remaining high, consumers are still feeling the pinch,” Heywood said.
“The priority for everyone in the credit sector right now should be on affordability. On improving access to credit for those who meet lending requirements, and taking care of those that, by no fault of their own, who find they cannot.”
Meanwhile, Jason Ferrando, founder and chief executive of peer-to-peer lending platform easyMoney predicted that mortgage lending will continue to rise as borrowers seek out more affordable products.
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“Although interest rates remain at their highest level since 2008, it appears as though the nation’s homebuyers are growing in confidence, with mortgage approvals reaching their highest levels since July of last year,” Ferrando added.
“While many have now adapted to the ‘new normal’ where current mortgage affordability is concerned, there’s no doubt that a freeze on interest rates has helped bring renewed confidence to the market.
“With a rate reduction expected in 2024, this will only help strengthen the market further, as buyers return in search of their ideal home, enticed by the prospect of lower mortgage rates further down the line.”
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