Gross mortgage lending 10% stronger than a year ago

Gross mortgage lending declined to an estimated £10.5 billion in January, report the Council of Mortgage Lenders.

Related topics:  Mortgages
Millie Dyson
20th February 2012
Mortgages
Lending fell by 14% from £12.2 billion in December but was 10% higher than the total of £9.5 billion in January 2011, according to the Council of Mortgage Lenders. Although a seasonal decline is expected, January was the sixth month in a row of higher year-on-year lending.

In today's CML market commentary, CML chief economist Bob Pannell comments:

"Housing and mortgage market sentiment has improved a little over recent weeks.

"The increase in lending compared to January last year helps support our view that housing and mortgage market activity may be boosted by first-time buyers seeking to complete deals before the stamp duty concession ends in March.

"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."

David Brown, commercial director of LSL Property Services, comments:

“CML’s latest figures point to a steadily strengthening mortgage market. While a surge of demand from first-time buyers trying to beat the end of the stamp duty holiday may have helped boost mortgage lending in January, it is by no means the only reason - lending has been gradually improving for the last six months.

"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.

"As rents rise, and buoyant tenant demand keeps landlords’ void periods to a minimum, investment in the private rented sector looks increasingly attractive, and it is these fundamentals that are drumming up demand for buy-to-let mortgages.” 

Steve Wilkie, managing director of Responsible Equity Release, comments:

"At first glance the 10% year on year rise in mortgage lending appears encouraging. But the fact remains that the take-up of new mortgages is still very low historically.

"Behind the near-stagnant headline lending figures is a number of far greater concern - the amount of interest-only loans that are now coming to the end of their terms with severe shortfalls.

"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."

Jonathan Samuels, CEO of Dragonfly Property Finance, commented:

"The year on year rise in mortgage activity has no doubt been bolstered by a flurry of interest from first time buyers keen to avoid stamp duty. In such a tough climate they'll be jumping on every morsel they can get, and rightly so.

"While lower inflation naturally leaves more money in people's pockets, it may be a little premature to suggest this will boost the economy and housing market, given the precarious state of the eurozone.

"Rising unemployment and weak economic growth will continue to hamper mortgage activity during 2012. With demand for rental property continuing to soar, buy to let will continue to be the lone exception to the rule."

Paul Hunt, managing director of Phoebus Software said:

“Forget about the monthly fall – the yearly rise in mortgage lending is excellent news for both the mortgage and property markets. We normally see a seasonal decline in lending in January, so the fall from December should be discounted.

"The important dynamic in the mortgage market is the growing confidence of mortgage lenders, driven by their ability to offer unprecedentedly affordable finance, which has led to half a year of annual increases in gross lending.

"A low Base Rate and assorted public sector schemes have certainly helped, but ultimately it is the boldness of lenders that has boosted volumes as they have refused to be cowed by the various looming economic threats. Regardless of what 2012 throws at the UK economy, the fact lenders are prepared to support the market wherever they can will be boon in the coming year”.
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