Mortgage Lending Increases

by Mark Johnston

New data from the Council of Mortgage Lenders (MCL) has shown that lending was 21 per cent higher in March than in February in 2011 but figures were still 2 per cent lower than lending figures for the same time last year.  While this uplift is positive, industry experts have advised that this increase is unlikely to least to any further significant uplift in house prices.

Actual lending was around the £11.3 billion mark for March and only £9.3 billion for February, making the initial quarter results for 2011 £30.1 billion.  This is up on the same quarter in 2010 which was £29.7 billion. 

Bob Pannell the chief economist from the CML said “The housing market has emerged hesitantly from hibernation” and that “Lenders expect mortgage credit availability to improve this quarter, and this should help to underpin house purchase activity albeit at pretty low levels. Remortgage demand, meanwhile, continues to firm, presumably linked to expectations of higher base rates.”

Re-mortgage approvals were the highest in over two years and the hope from the CML is that these trends continue and remortgage activity supports further and sustained lending activity.  Head of the Mortgage Advice Bureau, Brian Murphy has said “The latest gross mortgage lending figures are surprisingly positive and reflect what we’re seeing in the market, with remortgage activity particularly buoyant at the moment as homeowners continue to take advantage of the favourable interest rate environment.”

The number of houses available increased by 4 per cent in March and 37 per cent for the first quarter of 2011 compared to the last three months of 2010.  This data has come from 1,300 estate agent branches.  The number of estate agents has dropped by 0.8 per cent in March.

Property Financer Dragonfly, chief executive Jonathan Samuels said “Mortgage lending may be up in March but it’s still down in historical terms”, “We certainly don’t see this as the beginning of a trend given current conditions. For the rest of the year and on into 2012 the mainstream mortgage market – and house prices generally – will continue to flat line.” He commented further that it could be a couple of years before the mortgage market activity gets back to normal after the financial crisis.

“It’s important not to get too far ahead of ourselves.”  “The level of mortgage activity in March is still down on 12 months ago, and it’s far too soon to talk optimistically about a housing market recovery when buyers are still suffering from a serious lack of confidence,” said the Mortgage Advice Bureau.  “It is also worth bearing in mind that although March has been a good month for mortgage activity, there is every chance that April, despite the glorious weather, could be a total washout, with Royal Wedding fever sweeping the country and people taking advantage of two bank holiday weekends to go away. 

“How the market bounces back in May, following a predicted April lull, could very much determine how the mortgage market performs for the rest of the year.”

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