The latest estimate from the Council of Mortgage Lenders is for £17 billion of gross mortgage lending in November, and although this was 4% lower than October's figure of £17.6 billion it is still 30% higher than the £13 billion lent in November last year.
CML chief economist Bob Pannell pointed out that 2013 lending will be higher than the £156 billion originally forecast, but admitted it is still a far cry from the £363 billion experienced at the height of the lending boom in 2007.
‘New rules hardwire in a more risk averse lending environment for the future and so, while we expect lending to rise in line with better economic conditions, the next two years are unlikely to see lending levels getting very far above £200 billion a year,’ he said.
But market commentators are bullish. ‘Lenders are continuing to deliver loans to the house buying public in greater volumes than anyone had hoped at the start of the year. All this is being done without compromising on risk and affordability, which sets a positive tone for 2014,’ said Andy Frankish, new homes director at the Mortgage Advice Bureau (MAB).
‘We have begun to see a release of pent up demand from both first time buyers and second steppers, and there is plenty more to come as high loan to value (LTV) lending picks up. A degree of house price growth will be welcomed by anyone trapped with a lack of equity in their current home and unable to make a move. All in all, it adds up to greater movement and fluidity in the market which can free up first time buyer properties as existing owners move up the housing ladder,’ he explained.
‘Recent growth in lending figures has been achieved before Help to Buy phase two loans have even been approved, so we can certainly expect bigger things in the new year. Mortgage seekers had more than 12,000 products to choose from during November, for the first time in recent memory, meaning there are more ways than ever for those who can afford it to seal a deal,’ he added.
According to Ian McGrail, managing director of First Mortgage, the increased year on year gross lending figures from the CML are largely attributable to first time buyers making the most of the Help to Buy initiative to get their foot on the property ladder.
‘It will be interesting to see whether this upward trend continues into 2014, or if the recent withdrawal of Funding for Lending will have the opposite effect. The increase in mortgage lending is also a further sign that the economy is on a steady route to recovery,’ he said.
‘Whilst this upturn is helping people onto the property ladder, it is still extremely challenging for a number of people to save for a deposit which is why we hope that Help to Buy will not be withdrawn too early over the next 12 months,’ he added.
Paul Hunt, managing director of Phoebus Software, firmly believes that the mortgage market is turning a corner, and its fitness has been improving rapidly. ‘The revival in lending to first time buyers towards the end of 2013 was particularly striking. Lending levels are up by 30% compared to a year ago, a sign that there has been a significant jump in activity in the market,’ he said.
‘Lenders are cutting rates and making more money available to a wider range of borrowers. The Help to Buy scheme seems to be working effectively in boosting the number of first time buyers by extending a helping hand to lower equity buyers, and helping them build a deposit,’ he pointed out.
‘Now that the Funding for Lending scheme has been axed, all eyes will be focussed on the Help to Buy scheme which will bring more energy into the lending market over the course of 2014. We’ve already seen a boost in attractive mortgage deals across the board, and as the market gains further momentum in the New Year, we should see more competitive rates reach a growing pool of borrowers,’ he added.
The figures clearly show how much the mortgage market has changed in 2013, according to Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA).
‘The Funding for Lending Scheme (FLS) and Help to Buy have been important factors in stimulating market confidence and expectations. Indeed the planned withdrawal of FLS support in 2014 and the lack of market reaction to this are clear indications that wider conditions have improved, and mortgage lending can now continue to grow under its own steam. Indeed IMLA’s view is that the market in 2013 will exceed the £170 billion set out in the CML figures,’ he explained.
‘The fact that greater lending volumes have been achieved this year while at the same time mortgage arrears and repossessions continue to fall would suggest that a responsible, risk adverse approach is now more deeply engrained in the market’s culture. With the new rules under the Mortgage Market Review (MMR) coming into force in April 2014, it will be important to retain the balance between tighter controls and the real and still unmet homeowner ambitions that remain across the UK,’ he pointed out.
‘Questions still need to be answered during 2014, including what the new ‘normal’ will look like for the mortgage lending market, what funding is needed to support it, and who will be inside this new market or outside of it. Until the situation becomes somewhat clearer we will not know what levels of homeownership the market can support and what role government must play. Despite this we end the year on a good note,’ he added.
