Mortgage lending leaps by 21%
Figures released today by the industry trade body revealed that total gross mortgage lending in May soared to £14.7bn, up from £12.2bn in April and a 17% annual rise on the £12.6bn lent in May 2012.
This level of mortgage lending has not been seen since October 2008, and is welcome news for homebuyers and remortgagors.
The increase in lending is likely to be due to a number of elements, including the increasing availability of low fixed rates, more mortgages available at higher loan to values, and increasing general confidence in the UK economy.
These official figures reflect the growth in the number of people registering their interest in buying with estate agents, and mortgage advisers reporting a rise in business.
Commenting on market conditions in this month’s Market Commentary, CML chief economist Bob Pannell said:
“Funding conditions, helped by the funding for lending scheme, continue to look favourable and are supporting more competitive mortgage pricing and availability and a gradual resumption of lenders’ risk appetite.
“While the direction of travel is clear and fits well with the more positive housing surveys from RICS and others, our forward estimate does imply somewhat stronger house purchase activity than we had been expecting. This may reflect a degree of pent up sales following the extended spell of poor weather earlier this year”.
David Whittaker, managing director of Mortgages for Business, added: “The mortgage market is starting to fizz again. The Funding for Lending scheme has helped clear the credit bottleneck and is allowing banks cheaper access to credit, which they are allowing to flow to borrowers. It’s like an alka seltzer being dropped into stagnant water. Rates on first-time buyer mortgages are at record lows, and lenders are more willing to lend to high LTV borrowers. Criteria have eased, and there are a wider range of mortgages for house purchasers to choose from. Most other areas of the economy haven’t been able to shake off the torpor induced by the financial crisis, but the mortgage market is beginning to and is at the vanguard of the UK’s economic recovery.
“A word of warning though: deposit requirements are still higher than they were prior to the banking crisis, and lenders are reluctant to fling open the doors to high LTV borrowers. Inflation is high, wage growth is low, and savings rates lower still. All those factors will make it hard for the recovery in lending to reach a higher level and get back to where it was prior to 2008.”