Gross mortgage lending in the UK reached £20.4 billion in December, down 4% from the previous month but 4% higher year on year, the latest figures show.
It brings the estimated total for the year to £246 billion, a 12% increase on 2015’s £220 billion and the highest annual gross lending figure since 2008, according to the data from the Council of Mortgage Lenders (CML).
Gross mortgage lending for the fourth quarter of 2016 was therefore an estimated £62 billion. This is a 3% decrease on the third quarter and closely matches the 61.8 billion lent in the fourth quarter of 2015.
‘The UK housing market, much like the wider UK economy, ended 2016 on a generally positive note. Approvals for house purchase have recovered strongly of late, and this should feed through to lending figures in the early months of 2017,’ said CML senior economist Mohammad Jamei.
‘The current availability of mortgage credit is benign, and the real issue continues to be a dearth of properties on the market, which adds to the challenges facing would-be buyers. Uncertainty associated with political factors and prospective changes to the tax treatment of landlords will weigh on prospects for the year ahead,’ he added.
However, the latest figures from the British Bankers Association (BBA) show that gross mortgage borrowing totalled £12.6 billion, up 3.6% from December 2015 while net mortgage borrowing grew by 2.5% compared to December 2015.
Re-mortgaging approvals were 30% higher than December 2015, and Rebecca Harding, BBA chief economist, said that this reflects borrowers’ desire to lock in to lower interest rates ahead of potential rise later this year.
According to Henry Woodcock, principal mortgage consultant at IRESS, overall the market in 2017 is likely to be dampened by uncertainties around the economy and buy to let lending levels are expected to be lower as further tax changes take effect.
Steve Olejnik, chief operating officer of Mortgages for Business, pointed out that the amount lent to buy to let landlords has been falling and this is set to continue. ‘We estimate that 2016’s total level of gross buy to let lending will stand at around £40 billion. This would put the sector’s share of lending at around 16% of 2016’s total, down from around 18% a year earlier, which is a realisation of policymakers’ plans to level the playing field between first time buyers and landlords,’ he explained.
‘Buy to let’s share will reduce further, and we believe that 15% is a healthy and sustainable level for the sector. Lending to landlords via limited companies will increase however, as landlords seek to increase their portfolio’s tax efficiency, and our most recent index showed limited company purchase applications increased to 69% of all applications in the fourth quarter of 2016,’ said Olejnik.
Shaun Church, director at Private Finance, pointed out that overall mortgage lending was higher in every single quarter of 2016 compared to the previous year. ‘Market fundamentals remain strong and buyer demand has continued to grow. This resilience is promising, and should support lending as we progress through 2017,’ he said.
‘Mortgage lending has been supported by record low rates and consumers have never had such good access to affordable finance. Remortgage activity has also been responsible for a significant chunk of recent lending and the ultra-low interest rate environment presents a real incentive for borrowers with the right circumstances to switch to affordable long-term fixes, which should insulate them against any future rate rises,’ he explained.
However, he believe that one thing that could derail this momentum is the lack of new homes coming on to the market. ‘With no clear solution in sight and inflation predicted to rise in 2017, this could impact buyer affordability and therefore limit demand. However, the Government’s long awaited Housing White Paper is expected to provide some answers,’ he added.
