More mortgages are being granted for buyers in the UK residential property market but experts are divided over whether this is a blip or the start of the road to recovery.
The latest figures from the Council of Mortgage Lenders show that gross mortgage lending totaled an estimated £12.6 billion in June, a 16% increase from the £10.8 billion lent in May. However, it was 3% lower than June 2010.
CML chief economist Bob Pannell said that it is disappointing economic growth, strong consumer price pressures, falling disposable incomes and an uncertain jobs market that is preventing people from buying property.
‘This backdrop weighs negatively on purchase decisions relating to home ownership. By contrast, landlord activity appears to have picked up recently and, with evidence of strong rental demand, this should help to underpin activity over the coming months,’ he said.
Paul Hunt, managing director of Phoebus Software said it is a sign that lenders’ liquidity is improving and as a result, their confidence has begun to grow. ‘Lenders are pricing their products increasingly competitively, giving borrowers the chance to maximize the benefits of the almost certain continuation of low rates for the rest of this year. This has improved mortgage affordability and means lenders can put their hands in their pockets knowing the rates they offer are unlikely to break the bank for borrowers even though economic conditions remain uncertain,’ he explained.
Nevertheless, he added; ‘This isn’t yet enough to prevent the UK’s housing market from stagnating, but it’s a very encouraging sign indeed’.
It is just a flash in the pan though according to Richard Sexton, business development director of e.surv. ‘June’s figures reflect a concerted effort from lenders to meet their mid year lending targets, little more. It would be presumptuous to view this as a grand sign that lenders have a greater capacity to increase lending in the long term,’ he said.
‘In reality, lenders are stuck between a rock and a hard pace. On the one hand, they have a commitment to improve their capital, while on the other they are under political pressure to increase lending. These competing views are totally irreconcilable. If anything, the next few months are likely to see suppressed activity while lenders recoup equity and nurse balance sheets that still have to juggle a variety of risks,’ he added.
However, new research suggests that there is indeed much more choice for buyers. Nearly 9,000 mortgage products have been launched or updated in the last three months, according to independent financial research company Defaqto.
It found that, 8,968 mortgages were either brought to market or updated by providers between 01 April and the end of June this year. In addition, almost 600 mortgage products were removed from the market during this period.
Defaqto’s analysis of all mortgages on the market has identified that a total of 414 new mortgages were launched within the three-month period, and providers had made 8,554 changes to existing products, including amendments to their Loan to Values and interest rates.