UK gross mortgage lending showing signs of picking up


Mortgage lending in the UK is still down on a quarterly basis on what it was a year ago but there are signs of a pickup, according to the latest figures to be published.

Estimates from the Council of Mortgage Lenders shows that gross mortgage lending reached £16.5 billion in March, some 21% higher than February but lending for the first quarter is 12% down on the final quarter of 2014 and 3% down on the first quarter of 2014.

However it is up month on month for the month of March, some 7% higher than March of 2014 and CML chief economist Bob Pannell said that the underlying lending picture is stabilising.

‘Sentiment and activity are showing early signs of improvement, and should be further supported by the effects of stamp duty reform. We expect to see lending strengthen over the next few months, albeit from a relatively sluggish start in 2015,’ he said.

But buy to let lending is stronger. Data from the Bank of England shows that gross lending for buy to let purposes was £27.4 billion in 2014 and over the past five years the share of total buy to let lending in overall mortgage lending picked up to 15% in the fourth quarter of 2014 Q4, higher than in the pre-crisis period.

The Bank’s network of Agents noted that the rental market had continued to grow strongly in recent months, supporting continued steady growth in buy to let activity and gross buy to let lending has grown faster than overall gross mortgage lending in recent years.

Gross buy to let advances for remortgaging have also increased in recent years. As a share of the total it grew from 32% in 2002 to 52% in 2014, with the share of gross advances for house purchase at 45%.

According to David Whittaker, managing director of Mortgages for Business, buy to let is not subject to the nerves and jitters of this spring’s home owner mortgage market. ‘Election uncertainty might be putting some people off buying a home, but in the meantime millions of tenants still need somewhere to live and landlords are investing in new properties, as buy to let mortgage rates reach new lows,’ he said.

‘Underpinning this, rents are picking up on the back of a strengthening jobs market, supporting yields while steady price growth is still providing an additional bonus of capital growth to many landlords,’ he explained.

However he pointed out that there are uncertainties on the horizon. ‘The latest noises from the Bank of England indicate how the powers that be seem as unsure about the future path of interest rates as the man on the street.  However, when rates do rise, or if the economic recovery does slow, landlords will be in a better position to stand up to headwinds than a year ago as their tenants’ financial health improves,’ he added.

In general the mortgage lending market is improving, according to Peter Rollings, chief executive of Marsh & Parsons. ‘The significant increase from February’s activity is welcome enough, but it is the year on year figure that is even more encouraging when you consider how strongly the property market began 2014,’ he pointed out.

‘With only a fortnight to go until the general election, buyers and sellers will soon have a more concrete idea of what the future holds for the property market and will be able to act more decisively. Factor in other considerations such as attractive mortgage rates and the fact that late spring into early summer is traditionally a busy time for the property market and the outlook is rosy,’ he added.

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