Mortgage lending in the UK ends the year higher than expected

Gross mortgage in the UK lending was an estimated £17 billion in December, according to the latest figures from the Council of Mortgage Lenders, bringing the estimated total for the year to £177 billion, up from £143 billion in 2012.

This matches November’s gross lending total, however, it is 49% higher than December 2012 when it was £11.4 billion, and the highest total for a December since 2007.

Gross lending for the fourth quarter of 2013 was therefore an estimated £52 billion, a 5% increase on the third quarter of last year and a 38% increase on the fourth quarter of 2012 when it was £37 billion.

This is the highest lending amount by quarter since quarter three of 2008 and CML chief economist Bob Pannell said that the short term growth prospects for the housing market and the wider economy look very positive as mortgage lending was stronger than expected in the closing months of 2013.

But he added that lenders expect little if any boost to borrower demand this quarter. ‘While some of these gains reflect government schemes, the rationale for the positive narrative is a much broader one, reflecting such factors as the improving economy and jobs market, consumer confidence and competitive mortgage deals,’ he explained.

According to David Newnes, director of LSL Property Services, owners of Your Move and Reeds Rains, the property market is strengthening in tandem with a rapid rise in lending, in part thanks to growing consumer confidence now the economy has snapped back into shape.

‘It is music to our ears that house purchase lending is up by half over the past year, with the December total reaching the loftiest height since before the crisis took hold. Borrowing conditions have eased, which combined with a range of attractive mortgage deals, has caused flocks of buyers to dash back to the market. Lenders have been key, and clearly they are more willing to lend to high LTV borrowers, which in turn has led to a substantial rise in first-time buyer activity,’ he said.

He also pointed out that schemes such as Help to Buy have provided solid foundations for further growth. ‘But the grey cloud hanging above, is the lack of housing supply. Clearly a priority for the government is house building and this is crucial to make sure the market recovery powers onwards and upwards at a sustainable rate, ensuring budding first time buyers are not locked out,’ he added.

Duncan Kreeger, director of West One Loans, the largest privately funded short term lender in the UK, believes that a healthier mortgage market is great news but he said that while levels of demand for property surge forwards, volumes of supply are dwindling.

'Without the right properties in the right places, real progress for the housing market is still some way off. The problem of supply is made infinitely worse by a lack of business finance, outlined in this morning’s Bank of England report. Many of the firms suffering most from reduced levels of business lending include thousands of small construction companies, firms that would otherwise be able to convert, develop and build our way out of this supply crisis. Solving that property conundrum is more complicated than plain volumes and needs imagination,’ he added.

It is confidence from schemes like Help to Buy that are helping the housing market, according to Peter Rollings, chief executive officer of Marsh & Parsons. ‘This is rippling out to all levels of the market. Positive sentiment as a result of low interest rates and the brightening economic picture will continue to drive the nationwide market recovery forward,’ he said.

‘But contrary to some concerns, we’re some distance away from the bubble zone’, as the volume of sales is still miles off 2007 peak levels. In reality the wider market is still catching up after almost half a decade of lethargy,’ he explained.

‘But the London property market is operating in a realm of its own, with levels of demand unheard of in the rest of the country. At the beginning of 2014, we recorded almost 23 registered buyers for each available property, which will keep prices high until more homes become available,’ he added.

Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA), also believes that the mortgage market has been able to flourish against a brighter economic landscape and boosted by support from government. ‘Market conditions and consumer sentiment are noticeably improved and efforts must now focus on ensuring this shift becomes permanent,’ he said.

‘However, we cannot rest on our laurels so long as the market is still receiving outside assistance. Help to Buy has become a significant factor in steering growth by stimulating certain areas, particularly first time buyers. We are all curious to see what will happen when the scheme comes to an end and in fact, how the government intends to do this,’ he pointed out.

'Until then we are still looking at a distorted market, with more fuel being pumped into certain areas than others. We will only be able to achieve sustainable growth once this external support has been withdrawn. The incoming Mortgage Market Review has set out new regulatory boundaries, but we need to ensure this does not hamper the growth trend and push the dreams of homeownership out of reach once again,’ he concluded.