Property lending in the UK creeps up 2% in September but likely to remain subdued, report shows

Property lending in the UK increased by 2% in September compared with the previous month but it is still some 27% down for the same period last year, according to the latest figures to be published.

The figures from the Council of Mortgage Lenders also show that there has been a pick up in house purchase activity, but this is off-set by a decline in re-mortgaging. But the date shows an encouraging upward trend although many analysts believe that it is still way below levels that are needed to help the tentative property recovery.

‘House buying activity is running at considerably higher levels than around the turn of the year. However, it remains weak on any historic comparison and is unlikely to rise much further given the constraints the lending community faces and a still difficult economic backdrop,’ said CML economist Paul Samter.

‘But there are some positive signs to look to. While the retail side, both in terms of mortgage and savings activity, has thrown up few surprises, it is encouraging that the wholesale markets have begun to thaw,’ he explained.

‘Some of the UK’s highly rated institutions have been able to issue structured finance products backed by mortgages in recent weeks. This is only an early sign of wholesale investors tentatively coming back into the new issuance market, but is welcome nonetheless,’ he added.

The figures though are fresh evidence that the housing market is experiencing a resurgence in activity. Recent surveys, including from Nationwide Building Society, have suggested that house prices have returned to levels last seen in September 2008, with the high end of the market in particular beginning to boom again.However, all this could change depending on what happens with proposals outlined by the Financial Services Authority earlier this week. The financial regulator unveiled plans to tighten mortgage lending practices designed to prevent banks from lending to customers who can’t afford to repay their loans.

Among a string of initiatives, the FSA outlined plans to ban self-certified mortgages, popularly known as liar’s loans, where borrowers have to provide scant proof of their ability to repay borrowings.

Samter added that mortgage borrowing was unlikely to rise substantially above today’s reported levels because of the constraints faced by lenders and continued economic uncertainty.


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