Buoyant Mortgage Lending Figures Signal Meaningful Recovery in UK Property Market

This June 18, 2013 article by the Property Wire reveals the total gross mortgage lending in the UK in June increase to  £15 billion, the highest monthly estimate since October 2008, according to the latest data report from the Council of Mortgage Lenders.
 
It is a rise of 2% from £14.7 billion in May and 26% higher than the total of £11.9 billion in June 2012. And gross lending for the second quarter of 2013 was an estimated £42 billion, a 24% increase from the previous three months and is the highest quarterly estimate since the end of 2008.

‘Improvements in the cost and availability of mortgage credit are underpinning a meaningful recovery in the housing market. In recent months, we have seen the strongest performance for mortgage lending since 2008,’ said CML chief economist Bob Pannell.

‘However, although the pace of first time buyer activity is approaching a quarter of a million per annum, it is worth bearing in mind that this is still barely half of activity rates a decade earlier, and so far below what might be considered normal levels,’ he added.

But it is slow progress, according to David Brown, commercial director of LSL Property Services. ‘A whole year of months like June would be needed to bring gross mortgage lending to half its 2007 peak. But by any measure, 26% annual growth is definitely a positive sign,’ he pointed out.

‘What’s especially encouraging are the lower rates that are slowly trickling through to borrowers with less equity. More first time buyers are very gradually emerging into the world of home ownership,’ he said.

‘Of course it’s still very early days, and the number of people renting is still rising too. Wage growth is only creeping slowly towards buoyant inflation, and measly savings rates are a serious obstacle to raising a deposit. But so long as this isn’t a false dawn, mortgage availability is going in the right direction,’ he added.

Duncan Kreeger, director of secured peer to peer lender West One Loans,  explained that comparisons with October 2008 do nothing to hide the fact that mortgage lending in the UK still has a long way to go. ‘In October 2008 the global economy was in free fall.  The financial crisis had just hit its very peak. In the US emergency measures were agreed by Congress to prevent economic collapse. In the UK stock markets were tumbling and millions of people saw their financial future melt in front of their eyes,’ he said.

He believes that unwieldy high street banks might never recover the levels of business they saw before the collapse and the largest lenders are still losing market share to new forms of finance. ‘We expect that to continue and we believe it’s a positive trend. New financial models will be better for consumers, better for business, and a better way to prevent economic disasters like October 2008,’ he added.

Paul Hunt, managing director of Phoebus Software, a specialist in banking technology, said that although a lot of new buyers are still struggling to overcome the deposit hurdle, lenders are offering great rates and attractive mortgage packages.

‘The increasing confidence of the banks is shining through. The mortgage market is gaining strength. The government has boosted first time buyer activity successfully and there’s been a vast improvement in the availability of good mortgage deals for high LTV borrowers,’ he explained.

‘There is more competition amongst lenders and that’s delivering better value products to borrowers and boosting opportunities for first time buyers. And with lending up, rays of light have entered the economic picture. But the government’s role is crucial if mortgage lending targets are to be met and the market is to maintain its forward momentum,’ he added.
David Newnes, director of LSL Property Services, owners of Your Move and Reeds Rains, believes that the improving economic climate is boosting the confidence of banks and that’s translating into more lending and that increased supply of mortgages is being eagerly consumed by potential buyers with a strong appetite for borrowing.

'Lenders' efforts to bolster first time buyer activity are clearly having a positive effect, with more competitive mortgage rates and higher loan to values leading to a conspicuous jump in first time buyers loans. The spotlight is focused on the Help to Buy scheme and whether it will feed through into a noteworthy jump in lending figures this year. Hopefully these efforts will be bolstered further by the Government's Funding for Lending programme,' he explained.

'Together these initiatives will continue to boost competition among lenders and help stimulate greater activity in the vital lower tiers of the market even further by making more cheap funding available for mortgages. At this rate, lenders will be more likely to offer better rates on 90 to 95% loans and this will hopefully reach out to an even wider audience of first time buyers struggling to put together a deposit.The only way major leaps will be made is if the Government and lenders sharpen the focus for their mortgage targets onto the first time buyer market,' he added.

According to Stuart Law, chief executive of peer to peer lender Assetz Capital, the latest CML figures are extremely positive news for main stream mortgage lending as funding for lending frees up new low cost capital for banks. 'Help to buy is already helping new build sales and will massively help the second hand home buyers when the mortgage guarantee scheme comes on stream next January,' he said.

He also said that while all this activity will drive new construction and hence jobs and GDP growth, small businesses, also a huge contributor to the economy, are not being allowed to share in this lending frenzy. 'Banks have turned their back on the once profitable SME business lending leaving it to the UK’s peer to peer lending market to fill the gap. Appetite for investors is huge, encouraged by the prospect of regulation in April 2014, and we are advocating a return to back to roots banking to help small businesses grow instead of being denied the credit, on offer in spades to the mortgage market, that they need to expand,' he added.

Article by: Property Wire
Article Source: http://www.propertywire.com/news/europe/uk-mortgage-lending-cml-201307188021.html