Commentators said that the figures are a clear indication that even before the arrival of Help to Buy the lending sector has been rising to the challenge of getting movement in the real estate market in the UK.
‘Mortgage finance is becoming increasingly accessible and there is now every reason to think about jumping on the property ladder. Mortgage rates are at a historic low, with two, three and five year fixes all below 4% for the first time since the recession hit,’ said Brian Murphy, head of lending at the Mortgage Advice Bureau.
He pointed out that the increase in lending comes at a time when there is a rapidly expanding selection of products with some 10,745 options available during September and this has created the perfect conditions to boost consumer confidence. The result is more mortgage applications this year to date than in the whole of 2012.
‘It’s clear that the market is continuing to grow, with average mortgage lending swelling by £1 billion in September compared to an average monthly increase of £0.8 billion in the past six months. With the outlook for the end of 2013 and beyond increasingly positive, consumers who have their deposit ready should act now to lock in to rock bottom rates before they inevitably rise,’ he added.
According to Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA), the latest figures from the Bank of England reflect a strengthening market. ‘It is interesting to note that remortgage loans have outpaced the growth in other sectors over the past month, with the number of approvals for remortgaging climbing from 35,178 to 33,023 in September. This shows that it is not just first time buyers who are taking advantage of the current competitive rates,’ he said.
‘This continuing upward trend bodes well for the future, but lenders and brokers alike believe there is plenty still to come. The thirst to lend has been quenched with the return of consumer confidence. The Funding for Lending Scheme (FLS) has played a significant part in this by improving the availability of mortgage credit and keeping mortgage rates consistently low,’ he explained.
He pointed out that Help to Buy should help to sustain this momentum, but it is important to recognise that there is unlikely to be a return to what might be deemed a ‘normal market’ for another two to three years due to the extent of the downturn. ‘The government and industry both need to keep this in mind and work together as we move towards the formation of a sustainable market,’ he added.
The data for lending by building societies and other mutual lenders shows that gross lending was up 50% to £3.7 billion compared to £2.5 billion in September 2012. Total gross lending for the first nine months was £29.9 billion, 32% higher than same period in 2012. Also gross lending market share for the first nine months of 2013 is 24%, up from 21% January to September 2012.
Around one in three new loans from mutuals in the nine months to September were made to first time buyers of which 29% were made to borrowers with a deposit of 10% or less. Net new mortgage lending, that is gross lending minus repayments and redemptions, was £1.4 billion in September, almost three times the amount in the same month last year.
Total net new lending by mutual lenders from January to September 2013 was £9.7 billion, double the amount in the same period last year and total net new lending for the mortgage market as a whole from January to September was £6.8 billion.
‘Building societies and other mutual lenders have been consistently open for business for the past year plus. What has changed and is the main factor driving this year on year lending increase, is a palpable improvement in consumer confidence. Currently, the primary success criterion that we are using to judge schemes such as Help to Buy is the positive effect that they have had on the behaviour of existing and aspiring home owners,’ said Adrian Coles, director general of the Building Societies Association.
‘Despite the increase in the cost of living, the UK public is still saving. With energy costs in particular now rising quite dramatically, household budgets will come under increasing pressure this winter. It is inevitable that this will eventually be reflected in the amount that individuals are able to save whether for specific purchases or simply to put by for a rainy day. We may well see this change reflected both in the retail sales figures for Christmas and savings numbers into the New Year,’ he added.
Paul Hunt, managing director of Phoebus Software, also believes that new loans are starting to improve conditions in the mortgage market. 'Lenders have been pivotal in supporting first time buyers with a range of attractive mortgage deals. House purchase lending has been growing steadily and it should benotes that it was conspicuously higher in September than in August, with 5% more lending and annually the increase is striking, up by over a third,' he said.
'The economy is gaining strength and momentum is building as banks lower rates and reach out to help new buyers and home movers. The growing strength supporting house prices means that the property market is on the road to recovery,' he added.
David Whittaker, managing director of Mortgages for Business, said that every indicator is now pointing upwards, with all expectations that this month will see even more lending than September but he added that it is critical to look into the detail too.'Good finance is about lending to the right people in the right places, not just boosting loan books at all costs. Lending to landlords is one of these growth areas, underpinned by strong rental yields, and providing all parties with exposure to the rising tide of property prices,' he pointed out.
'But equally, buy to let lending serves an important purpose. Loans to landlord are the vital bridge between those already on the property ladder, and those who aren’t. Lending to landlords allows them to expand the supply of property to let. With almost one in five now living in the private rented sector that’s vital to keep pace with demand,' he said.
