Mortgage lending at highest level since 2008, says Council of Mortgage Lenders

Mortgage lending levels have reached their highest point since February 2008, official data from Council of Mortgage Lenders has revealed, as the property market continues its astonishing upwards trajectory.
 
The CML, which is comprised of 98% of the UKís mortgage providerís estimated that around £15.2 billion worth of secured loans were approved and distributed in February, which is a 43% rise on year by year comparison.
However, the CML moved to allay fears about a potential housing bubble and the market ëoverheatingí, by highlighting that mortgage lenders compared to January had actually fallen by 6%, when a monumental £16.1 billion worth of secured loans were distributed to aspiring homeowners. 
They also pointed out that whilst mortgage lending was up on year by year comparison, that nevertheless total lending is currently at its lowest point since June last year, and called the current nature of the market ëstrongí but ëstabilisingí. 
Bob Pannell, chief economist for the CML, said:
“First-time buyers have benefited most from the Government’s Help to Buy initiatives, with the more recent mortgage guarantee scheme now starting to push typical loan-value levels higher.
“The housing market got a further boost from this week’s Budget. This, together with benign developments in the economy more widely, should bolster short-term sentiment and activity.”
ëBubble fears cooling downí
The issue of rising property prices has been an area of huge contention in recent times, with the governmentís flagship Help to Buy scheme coming under fire for artificially increasing demand at a rate that supply cannot keep up with.
In particular, it is the second phase of the scheme, the Mortgage Guarantee that has been most heavily scrutinised, as it has enabled many people to acquire a mortgage with as high as 95% loan to value, whilst also paying just a 5% deposit on the property.
And fears have risen that many workers, particularly young aspiring homeowners, are counterproductively being priced out of the property ladder, as huge demand is pushing prices out of their incomes reach. 
Moreover, there are fears that a potential bubble could occur down the line when interest rates rise, as those who have capitalised on the Bank of England retaining their base rate at its historic low of 0% and borrowed substantial sums cheap, will be faced with vastly higher monthly payments on their loan when rates do rise.
This could lead many to be contributing far too much of their salary towards their mortgages alone, and could lead to a substantial personal finance crash later on down the line if wages fail to pick up. 
However, the Chancellor did announce on the backdrop of yesterdayís budget that he would be extending the first phase of the scheme, the Equity Loan, until 2020, and announced the creation of a new garden city in Ebbsfleet that would create 120,000 new homes available for purchase. 
The Equity Loan scheme was initiated last April, and gave people financial backing if they desired to build their homes from scratch, and its extension in tandem with the unveiling of plans for the new ëgarden cityí are likely a measure to address the low levels of supply at the moment, that are in desperate need of catching up with demand in order to stabilise property prices in the market. 
Market analysts have also highlighted that new mortgage regulations that are set to be implemented next month will also contribute to stabilising house prices and ensuring that only people who have a large amount of surplus income acquire mortgages. The new rules will see a move away from lenders utilising the income multiples method to ascertain how much they can give out in the form of a mortgage to a borrower, and instead will be replaced by a dual natured income test that will check a personís capacity to make their monthly repayments based on interest rates now and in the future. 
The aspiring borrower will have to clearly show that their finances can manage to maintain both payments in order to qualify, and it is hoped that this will prevent people who are simply capitalising on low borrowing costs from obtaining liabilities that will catch up with them later on down the line. 
The Office for Budget Responsibility (OBR) has predicted that the severity of property price increases will follow a downward trajectory during each year from now, forecasting a rise on average by 8.5% this year, 7.8% in 2015, 5% in 2016, and a substantially lower 3.7% in 2018 and 2019.
Despite the Chancellorís announcement about the creation of the ëgarden city, the Royal Institution of Chartered Surveyors (Rics) has argued that ëmuch more needs to be done” and have hit out at Mr Osborne for failing to give financial backing to aspiring homeowners through a reform in the way stamp duty is charged. 
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