There are signs that the market weakness of recent months may be coming to an end, according to the Council of Mortgage Lenders. The CML’s forward estimate is that total gross mortgage lending recovered to £12.9 billion in October. This would reverse the sharp dip reported for September, and imply that lending was 4% higher than the same month a year earlier.
In today’s market commentary, CML chief economist Bob Pannell observes:
“House purchase and remortgage activity both appear to have picked up recently, and this should be supported by an improvement in the availability and pricing of mortgages.
“The Funding for Lending Scheme is likely to have made an early positive impact, helping to counter some of the negative pressures associated with a protracted and weak economic recovery.”
Richard Sexton, director of e.surv chartered surveyors, said:
“Ironically, the mortgage market seems to be thawing as we enter the wintermonths. Loans for house purchase rose 10% last month, and approvals were up on an annual basis for the first time in five months. The improvement is largely down to FLS, which has encouraged banks’ to increase lending. FLS has created a cacophony of debate, but it looks likewe’re finally seeing it boost lending by supporting banks’ balance sheets with cheaper funds.
The scheme has been aided and abetted by wider improvements in the economy, particularly to the labour market, but it’s unlikely to be enough to offset chronic ailments buried deep beneath the skin of the mortgage market, longer term. Banks’ are still required to put aside high capital ratios, which leaches funds away that could be used to increase first-time buyer lending – traditionally the engine room of the property market. And anaemic economic growth will act as a real drag on lending volumes, potentially for years to come. These broader underlying problems are likely to keep the mortgage market anchored at the subdued levels we’ve been accustomed to seeing post-2008.”