Mortgage lending up by a fifth

Published: Thursday 23rd April 2015 by The News Editor

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Mortgage lending jumped by one fifth month-on-month in March following a sluggish start to the year, banks and building societies have reported.

An estimated £16.5 billion-worth of home loans were handed out last month, marking a 21% increase when compared with February, the Council of Mortgage Lenders (CML) said.

The latest monthly lending total is also 7% higher than the £15.4 billion-worth of mortgages advanced in March 2014.

Despite March being a better month for lending, the overall value of mortgages handed out across the first three months of this year, at around £44.9 billion, is still 3% lower than the value of home loans advanced in the first quarter of 2014, the CML said.

The CML’s chief economist Bob Pannell said that an overhaul of stamp duty in December last year should help mortgage lending to continue to strengthen in the coming months. The change to stamp duty has made the tax cheaper for the majority of home buyers who are liable to pay it.

He said: “The underlying lending picture is stabilising. Sentiment and activity are showing early signs of improvement, and should be further supported by the effects of stamp duty reform. We expect to see lending strengthen over the next few months, albeit from a relatively sluggish start in 2015.”

The CML said the subdued mortgage lending seen over the past few months has been “somewhat at odds” with the recovery in the rest of the economy – and March’s lending estimate could be a sign that the market is beginning a modest recovery.

In the market commentary section on its website, it said: “Looking ahead, a variety of factors look set to impact demand over the short term.

“While market fundamentals, such as the strength of the economy and jobs market, helped by stamp duty reforms, should boost demand, the uncertainty around the General Election could pare back demand.”

The figures follow a report from the Royal Institution of Chartered Surveyors (Rics) last week, which raised concerns about signs of a “worrying” upward pressure on house prices, fuelled by a lack of supply of homes on the market for buyers to choose from.

In a recent credit conditions survey of banks and building societies, the Bank of England found that demand from home-buyers for mortgages fell in the first three months of the year, continuing a trend seen since the middle of 2014.

But lenders expect demand for mortgages for house purchase, and particularly prime lending, to increase in the coming three months.

Meanwhile, lenders are continuing a battle to chop their mortgage rates to ultra-low levels, with HSBC recently launching the lowest five-year fixed-rate deal that the market has ever seen, at 1.99%.

Published: Thursday 23rd April 2015 by The News Editor

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