Gross mortgage lending in UK reaches five year high for month of October

Total gross mortgage lending in the UK increased to £17.6 billion in October, representing a rise of 9% from £16.2 billion in September and 37% higher than the total of £12.9 billion in October last year.

The Council of Mortgage Lenders said that this is the highest monthly estimate for gross lending since October 2008 when it was £18.6 billion.

According to CML chief economist Bob Pannell housing activity is set to strengthen further in the short term, and to contribute materially to overall economic growth.

‘Combined with the Bank of England’s recent optimism about the economy, this has led some commentators to speculate that an early rate rise may be on the cards. We do not currently share this view, which we believe underplays the importance that the Monetary Policy Committee attaches to a secure recovery before raising rates,’ he said.

A five year monthly high demonstrates how the combined impact of the improving economy and government incentives has given the green light for growth in the mortgage arena, according to Peter Williams, executive director of the Intermediary Mortgage Lenders Association.

‘Despite the fact that interest rates will inevitably rise as the country pulls clear of recession, the Funding for Lending Scheme continues to help those lenders involved to furnish homebuyers with increasingly attractive mortgage rates. The Help to Buy mortgage guarantee has arrived at a busy time for many lenders with preparations underway for the change to mortgage regulations next April,’ he explained.

‘It is most encouraging that, while we fully expect to see greater numbers putting their weight behind the scheme in 2014, this hasn’t stopped more 95% mortgages appearing on the market as an early Christmas present for second steppers as well as first time buyers,’ he said.

‘It’s not often that housing is the commodity in short supply during the run up to the festive season, but any developer looking at these latest lending figures can be confident that improving access to mortgages will support them to sell new homes. 2013 has helped to re-establish construction activity but it is vital not to rest on our laurels,’ he added.

Brian Murphy, head of lending at Mortgage Advice Bureau (MAB), pointed out that the MAB’s own data shows that buyer applications rose at an even faster rate last month, up by 19% from September, which he said is a strong indication of growing appetite from consumers and a clear signal that the market is odds on for a busy end to the year.

‘When you look at the variety and pricing of the mortgages on offer, it’s no wonder more people are recognising that now is an excellent time to move or remortgage. Average two and three year fixed rates continue to set new records while five year rates remain close to their lowest point in years. With more products available last month than at any time since January 2009, and new offers launching by the day, home buyers are increasingly spoilt for choice,’ he said.

‘Although the Help to Buy mortgage guarantee has only been live since early October, the signs are already encouraging that it will help buyers with smaller deposits. We may not have seen a stampede of lenders joining the scheme, but October saw the biggest change in buyer loan to value (LTV) ratios in almost five years. The effect on the wider market has been to push the average deposit down from 31.1% to 27.8%. Even at this early stage, the property market already looks to be in reach of a wider range of consumers,’ he added.

Recovery is no longer a whispered word, or a vague hope, according to David Brown, commercial director of LSL Property Services. ‘Mortgages are flowing, and the property market has been revitalised. The fact that the availability of 95% mortgages has increased by more than 50% just adds to the excitement. There’s now a real pervasive feeling in the property world that we’re making real traction, in what only a few short years ago felt like quick sand,’ he said.

But he pointed out that the light at the end of the tunnel is a still distant glimmer for many aspiring home owners. ‘Mortgages are not houses, and there are still not enough homes to go around. However, with rents now rising more slowly than inflation, and the labour market starting to witness some of the early stages of better times, prospects for potential homeowners are now brighter,’ he explained.

‘While further down the line, we may look back at the closing months of 2013 as an exciting turning point, on the ground and in the moment every month is still a struggle for many households up and down the UK.  So it’s crucial that buy to let finance keeps flowing too, and landlords are able to take up the incentives on offer, to provide homes for a burgeoning private rented sector,’ he added.

Five years on from the global economic downturn that began in October 2008 the mortgage industry has reached the top of the crater and is poised to climb out, according to David Whittaker, managing director of Mortgages for Business.
‘Attention is turning to what kind of mortgages lenders are approving.  importantly it’s not all first time buyers. Not only is there activity in the home mover market but buy to let is busy too. We’ve seen increasing numbers of landlords remortgaging existing properties to raise capital to expand their portfolios,’ he

‘And this is good news for renters struggling to find suitable accommodation. In particular there has been an upturn in more complex buy to let transactions such as houses in multiple occupation and multi lets, a sign that both lenders and borrowers are looking to support renters on smaller budgets,’ he pointed out.