Property lending in UK shows first annual growth for more than two years but levels are still too low for a sustained recovery

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Property loans in the UK are increasing significantly but analysts warn that there is still not enough finance to help a sustained recovery in the market.

The number of mortgages granted in July rose 16% compared with the same months in 2008, the first annual growth for more than two years, according to the latest figures to be published by the Council of Mortgage Lenders.

The number of first time buyers applying for loans also increased significantly, up some 18%, giving hope that the battered property market is genuinely on the road to recovery, all be it a slow one.

The figures from the Council of Mortgage Lenders show that took out a total of 56,000 loans totalling £7.5 billion, 24% more than in June and 19% more than in July last year. The value of those loans was up 27% on June’s figure, and 6% higher than in July 2008.

Loans to first time buyers increased to 20,400, up 18% in July compared to the previous month, and by 22% compared to July 2008. While remortgaging increased by 21% in July compared to June, the percentage was still 53% down compared to July 2008.

More than three quarters of the loans taken out in July had fixed rates, with borrowers able to lock in to an average fixed rate of 4.7%, substantially below the average of 5.57% during the past decade.

Economists warn against unbridled optimism and predict a slow and fitful recovery. They point out that the improvements are fragile. ‘It’s tempting to call the turn in the mortgage market, and there is certainly concrete evidence that lending for house purchase is increasing, said CML chief economist Paul Samter.

‘But the overall picture is likely to stay relatively subdued for some time, especially as the wider economy is far from robust as yet,’ he added.

His warning comes alongside another group of economists from the Ernst & Young Item Club warned that property values may not return to their 2007 peak for at least another five years and it is cash rich individuals who are currently supporting the property market.

 

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