This is almost identical to January’s gross lending total of £10.65 billion and 14% higher than February last year at £9.4 billion.
‘Although a seasonal decline is expected over the winter months, our forward estimates suggest that February was the seventh month in a row of higher year on year lending. This indicates that lending for house purchase remains brisk in advance of the lending of the stamp duty concession,’ said CML chief economist Bob Pannell.
‘The launch of the NewBuy scheme is an important addition to lenders’ toolkit in addressing the various needs of would be borrowers. The scheme has the potential to offset the dip in first time buyer activity that the end of the stamp duty concession on 24 March may produce,’ he added.
Richard Sexton, director of e.surv chartered surveyors, said that it might be the seventh straight month of growth in year on year gross lending, but that doesn’t mean it is seventh heaven yet for the mortgage market.
‘Lending in 2010 and 2011 was so weak that they represent poor comparators by which to judge the current health of the market. The economy is beginning to thaw after a difficult winter, but the recovery is still on unstable ground. Recoveries following the bursting of asset bubbles are often slow and brittle,’ he said.
‘It will only take another eurozone crisis or a shock in oil prices to tip the economy back into recession and this will permeate into the mortgage market. Lenders will be understandably cautious until the recovery is more secure,’ he explained.
He also pointed out that lending to borrowers with deposits of under 15% accounted for just 11% of all loans in February. ‘This suggests lenders are still reluctant to lend to poorer borrowers in significant volumes. In the medium term we can expect higher rates and moderate lending to first time buyers,’ he added.
‘In the upcoming budget, the government needs to stop focusing purely on austerity. Fiscal austerity has won the confidence of the bond markets, and that gives Chancellor George Osborne license to inject investment into the mortgage and housing markets. He also needs to encourage non banking UK companies to spend the cash deposits they have hoarded away, which totals some £700 billion. This will increase employment and help get the bottom of the housing market moving again,’ said Sexton.
According to David Brown, commercial director of LSL Property Services it was indeed a stronger than usual number of first time buyers looking to beat the end of the stamp duty holiday that played a role in the swollen lending figures in February.
‘But there is a more encouraging long term trend emerging. Lending figures have grown annually for seven consecutive months, suggesting lenders have been acclimatising to constrained funding environment. If lending holds up after the stamp duty holiday, this will demonstrate the relative stability of the market,’ he said.
‘However, despite the context of the approaching stamp duty holiday deadline, the impact of the growing buy to let sector of the market should not be underestimated. While the challenging economic conditions are likely to impact on the pace of any significant recovery in lending in the short term, an ebullient buy to let market will continue underpin the wider mortgage market as the year progresses,’ he added.
David Whittaker, managing director of Mortgages For Business, said that the real test will come in the months following the Budget. ‘Schemes like NewBuy, while well intentioned, will simply not do enough to maintain the momentum required to keep the market on an upward trajectory. Inflation may be coming down but it’s still cripplingly difficult for buyers to raise deposits let alone stamp duty provisions,’ he explained.
‘Once again we’ll see scores of would be buyers relying on private rental accommodation, the supply of which is already stretched as tight as Greece’s balance sheet and property investors and professional landlords will be relied upon to bridge the property gap. Much more needs to be done to find balance in the property sector’s recovery rather than focussing on one or two areas. Unfortunately, the Treasury seems intent on grinding the gear stick to try and find any gear rather than looking for long term measures that will support all elements of the market,’ he added.
