UK mortgage lending falls as experts warn of slower market ahead due to Olympics and Jubilee

UK mortgage lending falls as experts warn of slower market ahead due to Olympics and Jubilee - 2014-05-22

Gross mortgage lending in the UK declined almost 20% in April and is now only just 25 higher than it was a year ago, according to the latest figures from the Council of Mortgage Lenders.
UK mortgage lending falls as experts warn of slower market ahead due to Olympics and Jubilee


Lending fell by 19% from £12.6 billion in March to an estimated £10.2 billion in April which is just 2% higher than the total of £10 billion in April 2011.

CML chief economist Bob Pannell said that the underlying picture is better than the figures suggest. ‘Some first time buyers are likely to have brought forward their transactions to March to take advantage of the stamp duty concession that was coming to an end. Mortgage lending activity has been relatively buoyant in recent months, with stronger lending for house purchase underpinning the more upbeat lending picture,’ he explained.

But he admitted that the situation with the eurozone is uncertain and it has the potential to undermine UK economic prospects and conditions in the housing and mortgage markets. ‘The underlying picture is likely to be one of easing momentum in the housing market, but with potential for a sharper downwards correction on bad eurozone news,’ he added. 

Paul Hunt, managing director of Phoebus Software said that the industry should take heart from the fact that despite entering recession and with the eurozone circling the plughole, lenders have still managed to increase their activity since this time last year.

‘Even more impressive is that this has been achieved in a month where fiscal policy has created a hefty headwind in the form of stamp duty. These figures emphatically demonstrate the utter hubris of the government in suggesting the stamp duty holiday did nothing to boost the first time buyer market,’ he explained.

‘Last month it launched lending violently upwards and now we’ve seen the corresponding fall. The industry must hope now that first timers will be able to jump this additional fiscal barrier and keep coming to market. While that’s by no means certain, lenders’ consistently positive attitude to making finance available wherever responsibly possible provides a strong cause for optimism,’ he added.

Duncan Kreeger, chairman of specialist lender West One Loans, warned that if the eurozone crisis takes another serious turn for the worse, as looks likely, then mortgage lending to first time buyers could enter a state of near paralysis.

‘There is a big funding gap between supply and demand. Underlying borrower demand is actually very healthy, but banks and building societies don’t have the capacity to meet it. Not by a long shot. Net mortgage lending is 90% lower than it was pre 2008, and borrowers have to cross a painfully high threshold to get high loan to value mortgages,’ he pointed out.

‘We deal with plenty of property investors looking for buy to let finance who have been turned away by high street banks. More of them are seeking alternative forms of finance. It’s a trend that is becoming more pronounced as the mortgage market falls deeper into a trough,’ he added. 

The rush of first time buyers bringing transactions forward to avoid the reinstatement of stamp duty may have skewed the numbers in April but monthly lending will continue to fluctuate between growth and decline over the remainder of the year, according to David Whittaker, managing director of Mortgage for Business.

‘Events such as the Jubilee and Olympics will cause a slow down in activity over the summer and mounting concerns over the financial tragedy playing out in Greece will increase nervousness among both lenders and borrowers should contagion spread. Fortunately, new funding is still being brought into the lending market to supply the demand for buy to let borrowing. Funding that will be vital over the remainder of the year as demand for private rental accommodation continues to soar,’ he said.


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