Mortgage lending up to £15.4 billion in March, says Council of Mortgage Lenders

Total mortgage lending continued to raise in March, totalling a monumental £15.4 billion, a leading lending group has identified.
The Council of Mortgage Lenders said that gross mortgage lending was up 4% from February, and an astonishing 33% higher than the same time in 2013, though total lending across the first quarter or 2014 was lower than the three months before. 
The decrease lending in the first months of this year have been attributed to the typical winter slowdown, where consumers are typically less inclined to purchase a property with the summer on the horizon.
The CML also highlighted that the bulk of mortgage lending has continued to be done in the problematic areas of London and the South East, where rapidly increasing demand at a rate far higher than supply has fuelled fears that a potential housing ëbubbleí could occur sometime in the near future. 
New affordability checks
The statistics indicated that total mortgage lending in the first quarter of this year was £46.3 billion, which was a 10% fall from the quarter before but a staggering 37% rise from the equivocal period in 2013.
The CML has argued that whilst lending was down, that nevertheless the market remained strong, and forecasted lending to continue to be resolute despite fears that an extended period of high lending might result in a housing bubble.
The CML’s chief economist, Bob Pannell, said: “Alongside benign developments in the wider UK economy and the labour market, housing market sentiment continues to strengthen.
“There are currently no signs of significant market disruption arising from the imminent application of new lending rules associated with the mortgage market review. While some mortgage lending indicators have eased back gently, this is from the very high levels of recent months.”
The news comes a week before new regulations and rules for mortgage lending are set to be imposed upon banks and building societies which will necessitate that they instigate more stringent affordability checks on applicants. 
The changes will see lenders move away from the classic income multiples system of affordability checks to a tougher stress check that will first check an applicantís current salary against monthly repayments and then see how it holds up against higher payments when rates rise.
Borrowers will have to display that their income is able to cope with both payments in order to acquire a mortgage in a move that market analysts believe will cool down the lending market that has been booming since the latter stages of last year.  
Andy Knee, chief executive of property firm LMS, forecasted that that the new criteria would help cool speculation that a housing bubble is on the horizon as demand falls due to the increased difficulty in acquiring a mortgage that tougher affordability checks will incur. 
“The new Mortgage Market Review regulations coming into play later this month may put the brakes on and curtail lending,” he said.
“New buyers are likely to feel the effects the most, with stringent new checks and rigorous measures meaning even the most careful savers could face delays in stepping on to the property ladder.”
Nevertheless, the statistics continue to reflect worryingly on the situation in the London and the South East, where the average house price has always been higher than in other areas of the UK and has meteorically risen in the past year due to soaring levels of demand incurred from easy access to mortgages. 
“The vast majority of the housing market, and the lending to it, exist outside London, and much of it is experiencing nothing like the euphoric conditions that are filling the London media column inches,” the CML said. 
The CML estimated that the average first time buyer in the capital borrows £199,000 from their mortgage, which is substantially higher than the UK average of £110,000. 
However, they also disclosed that people living in the capital have a larger average salary, meaning they can put larger deposits of around 25% of their properties value down, higher than the 15% average for the rest of the UK. 
This would suggest that the problem area of mortgage repayments when interest rates rise will not simply affect householdís in London, with it appearing that those outside of the capital will have to pay a larger amount back on interest whenever the Bank decides to raise them from 0.5%. 

However, the new system of lending should have a genuine impact in promulgating the flow of demand that has contributed so heavily to rising prices, with lenders likely being aware of the importance of undertaking thorough and comprehensive tests on applicants, for the country, the lender and the borrowers long term benefit. 

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