Mortgage lending in UK up 9% month on month

Gross mortgage lending in the UK reached £22 billion in July, some 9% higher than June when it was £20.1 billion, according to the latest data to be published.

The figures from the Council of Mortgage Lenders, which represents over 90% of home lenders, also shows that it was 14% higher than July last year and the highest monthly figure since gross lending reached £23.6 billion in July 2008.

Mohammad Jamei, CML economist, explained that although it is the highest monthly total for seven years, it is in line with the CML’s expectation that lending would strengthen in the second half following subdued activity earlier in the year.

‘We expect lending activity in the rest of the year to be underpinned by improving economic fundamentals, but kept in check as any upward pressure on house prices further stretches affordability for some buyers,’ he said.

‘Today’s data is in line with our forecast that gross lending will rise to £209 billion this year, 3% higher than in 2014,’ he added.

John Eastgate, sales and marketing director of OneSavings Bank, believes that fears that the Bank of England was gearing up for an interest rate rise caused an uplift in re-mortgaging in July, as home owners raced to refinance before the cost of borrowing rises.

‘We’ve seen continued resilience in the buy to let market in spite of the tax changes announced in the Budget, and this has underpinned wider lending growth. However both last week’s Monetary Policy Committee minutes and the current weight of low inflation seem to have pushed back rate rise expectations into next year, so mortgage rates should remain historically attractive for longer,’ he pointed out.
He warned that it is not all plain sailing. ‘House prices are still on upward trajectory, which is doing nothing to take the sting out of entering the market for buyers. Unless serious commitments are made to build more homes, the supply deficit will continue to move the property ladder out of reach of those struggling to find a firm footing, causing greater long term reliance on the private rental sector,’ he said.

Henry Woodcock, principal mortgage consultant at IRESS, also believes that increased fears of an imminent base rate hike have boosted the remortgage market, causing many borrowers to consider moving onto fixed rates mortgages, and therefore buoying activity. 
‘While total lending is unlikely to hit the CML’s initial full year forecast of £222 billion, we expect a strong level of lending in the final part of the year. Now that the prospect of an imminent base rate hike has receded somewhat, historically attractive rates will be available for longer, supporting buyer demand,’ he said.

According to Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA), affordability checks designed to promote responsible lending are set to bite harder as the market grows and this suggests there is little prospect of activity growing unchecked, especially as the Bank of England is likely to take pre-emptive action to counter any signs of instability.

‘The eventual interest rate rise will also have a dampening effect, particularly as house prices continue to rise, and the next wave of regulation is just around the corner in the form of the European Union Mortgage Credit Directive which puts another potential hurdle in the way of long term recovery,’ he explained.

‘For now, consumers will be encouraged to see the gateways are still open to getting a mortgage under the new regime. But there are still important questions to answer about whether the current lending recovery is benefitting the many or the few,’ he concluded.