Lending slowly creeps up in UK property market but end of stamp duty holiday set to have adverse impact

An increase in property loans in the UK has been welcomed by the real estate industry but funding is still a challenge, experts point out.

The latest figures from the Bank of England show loans for house purchase rose 6% in September, the highest monthly figure since March last year.

The data showed that £7.6 billion was lent in September, up from £7.3 billion in August, also an 18 month high, and more than double the amount seen in the depths of the credit crunch last November. This rise in lending was, however, offset by a fall in the amount and value of remortgaging.

Council of Mortgage Lenders economist Paul Samter said the data showed clear evidence of a significant pick-up in lending activity in the housing market from a year ago, despite remaining low on a historic comparison.

‘Overall, the numbers support our view that housing market activity continues to strengthen. But we are cautious about how far we can expect it to continue increasing, with funding still a challenge and the economic outlook still subdued,’ he added.

And Simon Rubinsohn, Royal Institution of Chartered Surveyors chief economist, warned that the ending of the stamp duty holiday for properties valued at £175,000 or less at the end of this year could have an impact on transaction levels.

‘The data from the Bank of England provides further evidence that a little more money is now flowing through into the mortgage market. Gross lending in September climbed to its best level since January and, more significantly, this is also being accompanied by an increase in the level of net lending,’ he said.

‘Coupled with the latest numbers published by the Land Registry, the data suggests that transaction levels will continue to rise into the year end. However the ending of the stamp duty exemption on properties valued at £175,000 or less at the end December could hit activity levels particularly outside of London and the South East in the early part of 2010,’ he added.


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