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Gross mortgage lending rises 10% year-on-year

Mortgage Solutions
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Mortgage Solutions
Posted:
Updated:
20/02/2012

Gross mortgage lending in January rose 10% year-on-year to

Its latest figures showed that this was the sixth consecutive month of an increase in year-on-year lending, despite the expected seasonal decline, with house purchase “resilient” in January as remortgage activity levelled off and first-time buyers rushed to complete before the Stamp Duty holiday ends in March.

The CML highlighted that pressure on mortgage pricing and availability has also eased as funding conditions have improved since the turn of the year.

CML chief economist Bob Pannell said:

“The recent improvement in housing and mortgage market sentiment is welcome. But we should be careful not to overstate its significance, given the very low levels of activity we are starting from and the protracted and difficult economic rebalancing that the UK and other countries have embarked upon.”

He added: “Should inflationary pressures continue to fall back, the squeeze on household finances should ease progressively and help support stronger economic recovery going into the second half of the year. This can only be good news for the housing market further down the track.”

The CML also confirmed that 2011 gross mortgage lending totalled £140.7bn, up 4% on 2010 and the first year to see an increase in lending since 2007.

The growth was driven by the recovery of remortgage lending, up 17% on the previous year, while house purchase lending fell 6%.

David Brown, commercial director of LSL Property Services, said the figures pointed to a “steadily strengthening” market, with first-time buyers demand not the only factor boosting lending.

He said: “Mortgage rates are more affordable than ever and this is helping to sustain demand from both home buyers and investors. The resurgence of the buy-to-let market has also been key to the consolidation of the mortgage market and will continue to be so. Investment in the private rented sector looks increasingly attractive and it is these fundamentals that are drumming up demand for buy-to-let mortgages.”

However, Steve Wilkie, managing director of Responsible Equity Release, warned that the “near stagnant headline figures” hid a greater concern – the number of interest-only loans reaching the end of their term with shortfalls.

He said: “The interest-only time bomb is no longer ticking, it has gone off. Over the past two years, we have seen a sharp rise in the number of people approaching us with a shortfall in their mortgage amounting to tens of thousands of pounds.

“Last year, 36% of our customers used their equity to repay a mortgage, up almost a third on 2010. In almost all cases this was due to a shortfall in their endowment policies or other investment vehicles.

“In the first weeks of 2012 this trend has continued to pick up pace. Debt is just as much an issue for the older generation as it is the new.”

Meanwhile, Rightmove has revealed that asking prices for property recorded their biggest monthly increase since April 2002 in February, rising by 4.1% to an average of £233,252 compared to a fall of 0.8% in January. Asking prices were up 1.4% on January 2011.

Rightmove attributed the “surprisingly strong” growth to strong demand from cash rich buyers and a rise in market confidence as consumers accept current conditions as the “new norm”, while the rise in 90% LTV mortgages and buy-to-let deals has offered buyers renewed hope.


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