The recovery in the housing market is holding firm and mortgage lending will continue to grow, according to the latest report from the Association of Mortgage Intermediaries.
The recovery though will be slow because banks are still lending cautiously and first time buyers in particular are still being excluded from the property market mostly by the size of deposits that are required by lenders, according to it latest Quarterly Economic Bulletin.
The report indicates that regulatory pressure being placed on lenders to improve their capital position will result in gross lending totalling £145 billion in 2009. It predicts a rise to between £150 billion and £170 billion for 2010, although a return to the levels of lending seen prior to the recession is unlikely.
A recent drop in demand for remortgages should have left sufficient funds available for those looking to get onto the property ladder but first time buyers are still being limited by the size of deposits required. A lot of people also can’t get the finance to move.
‘The stability in prices we have seen in the last few months may have much to do with the limited supply of quality property coming on to the market,’ explained Robert Sinclair, director of AMI.
‘A serious concern now must be the number of people on base-rate linked default rates, who are effectively property prisoners for the foreseeable future, as moving would be economic suicide,’ he added.
One encouraging sign was that the trend line on mortgage arrears for the current stage in the economic cycle was looking positive. ‘This is probably due to those on fixed and default rates still having affordable mortgages. As long as unemployment stays within predicted boundaries, this will continue to underpin the market,’ he said.