Gross mortgage lending up 4pc

Robyn Hall

May 21, 2013

The figure represents a 21% year on year increase but the CML has cautioned that meaningful comparisons with last April are difficult.

Bob Pannell, CML chief economist, said: “Our forward estimate is that gross lending in April was £12.1bn. This would have been 4% up on March.

“The comparison with April last year – 21% higher – is flattered by the temporary dearth of house buying activity immediately following the closure of the stamp duty concession.

“The true underlying position is that April is likely to have been one of the strongest months for lending activity since late 2008, but not as strong as the year-earlier comparison suggests.

“Gross lending on a seasonally adjusted basis has been running comfortably above £12bn for several months but this is still barely half the average level of lending seen in 2003-4.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “April was another strong month for the mortgage market with an uptick in the number of new deals being taken out and a welcome rise in the number of first-time buyers.

“Funding for Lending has had a significant impact on the market: practically every move made by lenders in the past three months has been positive, either in terms of pricing, criteria or both.”

However Harris warned that growth was still steady rather than spectacular and noted his surprise at a continued lull in remortgaging activity.

He said: “Remortgaging remains subdued which is perhaps surprising given the rock-bottom mortgage rates now available.

“It may be that borrowers are sat on attractive reversion rates or standard variable rates so don’t wish to remortgage or are trapped because of tighter criteria or lack of equity in their homes so can’t switch.

“There may also be borrowers holding out for even better rates. However borrowers should look at rates in an historical context – these are the cheapest rates ever seen and even if they do edge a little lower, snapping one up now might be a good move. Don’t assume they will be around forever.

“The continued availability of extremely competitive rates across the loan to value spectrum will help inspire confidence and should continue to boost the housing market.”

Richard Sexton, director of e.surv chartered surveyors, said: “We’re seeing a refreshed and more flexible mortgage market emerge in 2013, a market that is in a much stronger positions to cater for the dreams of aspiring homeowners.

“Last month marked the strongest April for gross mortgage lending since 2008. But the biggest marker of success is the range of borrowers that the new mortgage market is now able to reach.

“One in nine mortgages in April was to high LTV borrowers, 14% higher than last year. Inflation is falling, confidence in the economy is improving, and the FTSE is at a record high. It’s a veritable cocktail of good economic news, and the strongest indication yet that the mortgage market has freed itself from the grip of the financial crisis.

“Banks have widened the goalposts for borrowers. They’ve introduced record-low rates, and a wider range of mortgages. Lenders have grown in confidence, so they are more willing to lend to high LTV borrowers. This has sparked a burst of activity, especially among first-time buyers. And falling inflation will make it easier for prospective buyers to construct a deposit for a mortgage. This should help keep the mortgage market firmly on the road to recovery.”

And Duncan Kreeger, director at peer-to-peer lender West One Loans, added: “Far from recuperating, the biggest lenders are still reeling from a crisis that struck over five years ago. Gross mortgage lending in the last twelve months represents only 40% of the 2007 level. But even this meagre flat-lining has only been possible thanks to huge subsidy. Strong comparisons with a year ago only reflect just how dependent the high-street lenders are on government support.

“In particular, business lending is still thoroughly submerged in the crisis, having seen negative growth since 2011. That’s part of the reason why – at £1 million pounds a day – alternative business finance has already outpaced Vince Cable’s latest £300 million pound ‘business bank’ offering by 20% this year.

“Traditional finance is undergoing a process of disintermediation – a process that could be terminal for certain old ways of doing things but a trend that could also provide a much more solid foundation for the future of finance.”

David Brown, commercial director at LSL Property Services, said: “Today’s figures are a step in the right direction, and there’s still plenty of way to go.

“Anyone would be forgiven for thinking things are looking rather positive right now. Upgraded growth forecasts, record share prices – and now the strongest April for mortgage lending since 2008. It all supports a much sunnier economic mood compared to a few months ago.

“But for plenty of people the monthly struggle is still set to continue for a while. Inflation is at its lowest level since September, but the Bank of England still expect inflation of over 3% this summer. Meanwhile, with 3.9% annual growth, rents are rising a little faster than other costs of living. And wages are still a serious obstacle to further progress on issues like rental arrears.

“It will take many more quarters of strong economic growth before more cash starts to trickle through to wages. But in the meantime better finance for landlords is one way to help the balance.

“Certainly, expanding the stock of privately rented homes is the best way to help control rents and ease the strain on the pockets of tenants.”

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