Data from the Bank of England shows that lenders granted 58,728 loans to buy homes, compared with 55,019 the previous month. It was the fourth successive monthly increase and the biggest since June 2009 but experts point out it is still too low to help revive the country’s flagging real estate market.
The figures reflect the fact that many first time buyers have been rushing into the market to beat the current stamp duty holiday which end on the 24th of March. Also analysts are warning that rising unemployment and weak consumer confidence could dampen demand in the coming months.
‘Despite the recent pick up, housing market activity is still low compared to long term norms. Economic fundamentals still look far from rosy for the housing market with unemployment high and likely to rise further, earnings growth muted, debt levels high and the outlook uncertain. In addition, credit conditions may well tighten, making it harder to get a mortgage,’ said Howard Archer, an economist at IHS Global Insight in London.
Approvals are running at little more than half the pace seen in 2007, the final year of Britain’s decade long housing boom. Still, Archer forecasts that the decline in property prices this year may be limited to 3% instead of the 5% previously predicted and said there is a growing possibility values may not fall at all.
Figures from the Building Societies Association, also published today, show that lending and approvals by mutuals increased year on year in January. Gross mortgage lending was up 32% and mortgage approvals increased by 54% on January 2011.
‘New lending and approvals for house purchase picked up across the market in January, perhaps in part due to first time buyers taking advantage of the stamp duty holiday before it ends in March. Lending activity by mutuals was up significantly in January compared to the same month last year, continuing the trend of increased lending by the mutual sector seen throughout 2011,’ said Adrian Coles, director general of the Building Societies Association.
Brian Murphy, head of lending at the Mortgage Advice Bureau, believes that with inflation falling and greater availability of competitive products, more and more consumers are deciding they have waited long enough to either purchase their first home or take the next step on the housing ladder.
‘Today’s Bank of England figures show this return to cautious optimism as well as the impact of the looming end to the stamp duty exemption period. At the Mortgage Advice Bureau the number of mortgages arranged in January 2012 was in matter of weeks may bring about something of a hiatus in activity for a period,’ he added.
Paul Hunt, managing director of Phoebus Software, points out that when you look at the growth rate of mortgage lending over a long period, the current figures look positively anaemic but in the context of the current economic situation the fact lending is increasing at all is very encouraging.
‘The amount of money lent by mortgage lenders has exceeded that repaid by borrowers for nine consecutive months and lending volumes are growing too. Even when wholesale lending rates were rising at the end of last year, lenders have shown they are prepared to provide mortgage finance despite the frequently troubling economic news both at home and abroad,’ he explained.
It is vital good news for the property market in the UK, according to David Brown, commercial director of LSL Property Services. ‘By pre-crunch standards, the level of mortgage lending in January was not spectacular by any means. But given the context of the current economic conditions and the ongoing eurozone crisis, a 7% monthly increase in house purchase lending is welcome sign of a strengthening mortgage market,’ he said.
‘The flurry of first time buyers rushing to complete before the end of the stamp duty holiday will have played a part, but any increase in mortgage lending is also a demonstration of confidence in the market from lenders. With the slim prospects of any bank rate rise in the foreseeable future, Libor has been dipping again in recent weeks – which should help keep down mortgage rates on new products,’ he pointed out.
‘As a result, the record affordability will continue to drive demand from both credit worthy buyers and investors looking to take advantage of the favourable conditions in the rental market,’ he added.
