New Figures Show Lending on the Increase

by Mark Johnston

The number of new mortgages in July rose by 5% in comparison with June this year. During July just over £13.5 billion was borrowed in the UK although this was still down for the same time last year in 2009 which was £14 billion.property pricesThe council of mortgage lenders published the lending figures and confirmed that the figures were still on track to meet their projected lending forecast of £140 billion for the full year.

Brian Murphy from a leading independent mortgage broker confirmed that they were not expecting any major changes for the rest of the year. He said: “There is no stamp duty incentive in the second half of 2010 so borrowing levels will invariably be down on the same period last year, especially with October’s spending review looming and people choosing to sit on their hands.

“Although the Bank of England’s monetary policy committee (MPC) voted 8-1 in favour of keeping rates on hold again this month, inflation remains above target and with unemployment likely to rise in the autumn in the wake of public sector cuts, many borrowers are avoiding base rate complacency.

“Perhaps the standout finding in July is that borrower appetite for variable rate mortgages waned and fixed rates were the overwhelming choice. Nationally, we have seen fixed rate mortgages among house purchase customers increase from around 45% in January this year to more than 60% in July. Increasingly, borrowers are aware of the danger of the base rate moving against them and are opting for the safe haven of fixed rate loans.”

That said, loan to value ratios are improving with more and more lenders offering competitive mortgages requiring lower deposits. The Co-Operative bank is currently top of the tables with a 3.19% tracker for three years requiring only a 15% deposit. The Yorkshire Building Society are still offering their two year tracker at 3.49% again with a 85% loan to value(LTV). Such deals seem to point to a growing appetite to lend. Competition between lenders might now start and drive down rates and loan to value rations.

A spokes person for the Council of Mortgage lenders highlighted that the industry did not expect any changes anytime soon. The CML still predict pretty flat lending in the rest of 2010 and potentially into the start of 2011. Recent figures on UK retail sales did not follow the same trend. The figures released by the Office of National Statistics showed an increase of 1.1% on last month and a 1.3% increase when compared against the same time last year.

Jeremy Cook , chief economist of currency exchange broker World First said: “This is very surprising and flies in the face of recent consumer confidence measures. I always suspected that the summer months would deliver a strong showing for the UK economy. However, this is likely to be the best we will see for a while. With the spending review just around the corner, I expect consumers will tighten their belts for fear of how the cuts will affect the average family.”



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