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Gross mortgage lending crept up during 2012, CML figures show

It means that the CML estimates that total lending for the year will be £143 billion, up from £141 billion in 2011 and it forecasts lending will reach £156 billion this year. This was despite a fall of £995 million in lending activity between November and December.

CML chief economist Bob Pannell said that overall he is more positive about the UK housing market and wider economy than a year ago, despite economic headwinds and downside risks.

‘A key reason is that lenders currently face few funding pressures, in part reflecting the funding for lending scheme. House purchase activity was robust in the fourth quarter, on the back of better mortgage availability and pricing, and we expect this to continue over the coming months,’ he added.

He explained that although the global backdrop remains challenging, the risks associated with the eurozone crisis appear less critical than at the start of 2012, thanks to the actions of the European Central Bank and European policy makers more generally.

‘A greater confidence that eurozone difficulties can be resolved over time has meant better funding market conditions since last summer. UK banks have benefitted even more, following the introduction of the funding for lending scheme (FLS) in August,’ he added.

He also pointed out that while it is still early days for the FLS, and so uncertainties around its effectiveness are understandable, the scheme clearly adds another monetary weapon to the Bank of England’s armoury.

‘Recent labour market conditions also represent a significant positive. The adult unemployment rate currently stands at 7.8%, down half a percentage point on a year earlier. And, as we highlighted in our recent market forecast paper, employment at 29.6 million is up half a million over the same period,’ said Pannell.

Peter Williams, Executive Director of the Intermediary Mortgage Lenders Association, said that a lull in mortgage lending is always to be expected in the last month of the year, but surpassing the 2011 annual gross lending total justifies the positive outlook for 2013.

'As demand returns and the Funding for Lending Scheme gains momentum, it presents lenders with a real chance to develop new product offers that can meet consumers’ varying needs. With innovation being key to gaining an advantage in the market, IMLA members will be at the forefront of this effort and the resulting competition should give brokers plenty of options to consider for potential borrowers,' he added.

Brian Murphy, head of lending at the Mortgage Advice Bureau (MAB) believes that conditions are now in place to make a significantly bigger leap over the next 12 months. ‘Mortgage credit is now more easily available, and the continuing product price drops mean that consumers have the luxury of choosing between some of the most appealing fixed rates we have seen since before the recession hit. It is especially promising to see this galvanizing borrowing across the market, so that whether you are making a new purchase or remortgaging an existing property, there are some particularly attractive options on the table,’ he explained.

‘Our latest National Mortgage Index also suggests that applications for purchase mortgages were noticeably higher last month than they were in December 2011. With new products appearing, we share CML’s optimism that the appetite for mortgage borrowing is returning to something approaching good health,’ he added.

But not everyone is convinced. Duncan Kreeger, chairman of peer to peer bridging lender West One Loans, believes that the mainstream sector still cannot provide enough lending to lift the market. He pointed out that lending amounts to just 39% of its pre-crunch peak.

He said that while mainstream dropped 4.5% in December the bridging sector went in the opposite direction around ten times as fast.
 
‘We believe that 2013 will be a similar story. Our survey of mortgage brokers shows they expect alternative finance to grow by 36% this year. But the high street lenders face even more fundamental problems than these figures suggest. They can’t get new funding without special government support. The CML’s members are jogging on the spot.  Peer to peer lenders will continue to outpace the mainstream’s tired old model,’ he added.

David Newnes, director of LSL Property Services, owners of Your Move and Reeds Rains, also pointed out that despite the launch of the Funding for Lending Scheme, credit remains tight especially for first time buyer lending. 'Thankfully lenders seem more optimistic for 2013. However, for the mortgage market to grow at the rate forecasted by the CML, any expansion in lending must be bottom up, easing the pressure on the private rented sector and unlocking chains throughout the wider housing market,' he said.

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