Gross mortgage lending in December reached an estimated £11.7 billion, according to the Council of Mortgage Lenders.
This brings the estimated total for the year to £143 billion, up from £141 billion in 2011. In 2013, the CML forecasts gross lending will reach £156 billion.
Commenting on market conditions in this month’s Market Commentary, CML chief economist Bob Pannell observes:
“We are more positive about the UK housing market and wider economy than a year ago, despite economic headwinds and downside risks. A key reason is that lenders currently face few funding pressures, in part reflecting the funding for lending scheme.
“House purchase activity was robust in the fourth quarter, on the back of better mortgage availability and pricing, and we expect this to continue over the coming months.”
Ashley Brown, director of the independent mortgage broker Moneysprite, commented:
“The CML forecasts gross lending in 2013 will be up 9% on 2012. That’s a bold statement to make and dependent on a number of factors working in the market’s favour.
“Lenders have to remain hungry to compete for customers, because borrowers have been taking advantage of some of the best mortgage deals in the past few months that we’ve seen, especially on fixed rate deals. If those fixed rate deals disappear then expect nervous borrowers to run for the hills.
“Although the Funding for Lending Scheme has started to show signs of working, it’s not had the immediate impact everyone was expecting, so the jury’s still out on whether it will be a game changer. And we need to see more activity at the higher loan to value level, rather than the concentration of deals focused on borrowers with large deposits.
“If lenders start becoming more interested in first time buyers again, then the CML prediction may well not be fantasy-land.
“This year is a critical one for the mortgage market after suffering a few years in the doldrums. The likelihood is that we will see improvement on last year, but nothing miraculous. The mortgage and property markets are in for a long, hard slog.”
Yasin Patel, director of the specialist mortgage lender Mayfair Bridging, commented:
“The timing is more than a touch ironic. Today’s data gives a grim reminder of how the mortgage market spent most of 2012 stuck in the deep freeze – but finally began to thaw in the fourth quarter.
“But the market is still not fully in from the cold. Gross lending in December was lower than at the same time last year, and the total annual increase was modest. Falling interest rates and a genuine price war in some parts of the market are finally nursing demand back to more normal levels. A reawakening housing market, in part fired by buy-to-let landlords, is also helping.
“The ambitions for the Funding for Lending Scheme were high, but the scheme’s impact is finally being felt. Lenders are not just cutting rates, but they are offering more products – even the high LTV loans they had shunned for so long.
“Mortgage criteria remain as strict as ever, but the main thing holding back the market now is a lack of property for sale. With the housing market still weak in much of the country, some sellers are still sitting on their hands in the hope that things will improve.
“As the increased demand slowly translates to higher house prices, it should also translate into progress for both the property and mortgage markets. But after the lessons of the past decade, this time any growth will be steady rather than stellar.
“The CML’s predictions for 2013 are upbeat. But while the momentum is real and steady, there is nothing inevitable about it yet.”
Brian Murphy, head of lending at Mortgage Advice Bureau, commented:
“Today’s figures from the CML certainly point to a stable momentum in the marketplace that should carry mortgage lending to greater heights in 2013. Finishing the year with a total of £143bn may be a modest improvement on 2011, but what matters most is that the conditions are now in place to make a significantly bigger leap over the next twelve months.
“Mortgage credit is now more easily available, and the continuing product price drops mean that consumers have the luxury of choosing between some of the most appealing fixed rates we have seen since before the recession hit. It is especially promising to see this galvanizing borrowing across the market, so that whether you are making a new purchase or remortgaging an existing property, there are some particularly attractive options on the table.
“Our latest National Mortgage Index also suggests that applications for purchase mortgages were noticeably higher last month than they were in December 2011. With new products appearing, we share CML’s optimism that the appetite for mortgage borrowing is returning to something approaching good health.”
David Brown, commercial director of LSL Property Services comments:
“While December may have been a little disappointing after the recent steps forward taken by the mortgage market, 2012 as a whole was a year of steady improvement. To build on that progress in 2013, and match the CML’s optimistic forecast for the year, lenders will need to do even more to unlock the demand from frustrated first time buyers who haven’t yet felt the full benefits of the Funding for Lending Scheme.
“New borrowers with smaller deposits will be a harbinger of real change, and more lending at higher LTVs will be crucial to the mortgage market returning to a semblance of its pre-crunch level. We’re starting to see more innovative products emerge, but it’s vital these aren’t accompanied by overly stringent criteria, and that those without the biggest deposits can access the cheaper funding on offer. Without drastic improvement in this part of the mortgage market, rental demand is going to remain high, placing upwards pressure on rents once the seasonal lull in the rental market has ended.”
Duncan Kreeger, chairman of peer-to-peer bridging lender West One Loans, comments:
“After lending just 39% of its pre-crunch peak, mainstream lending crawled over the finish line in 2012. The annual drop of 4.5% in December compared very unfavorably to the bridging sector which went in the opposite direction around ten times as fast. While the bridging market’s racing down the home straight like Mo Farah, the mortgage market looks more like Paula Radcliffe, limping along with injury trouble. 2013 will be a similar story.
“Our survey of mortgage brokers shows they expect alternative finance to grow by 36% this year. But the high street lenders face even more fundamental problems than these figures suggest. They can’t get new funding without special government support. The CML’s members are jogging on the spot. Peer-to-peer lenders will continue to outpace the mainstream’s tired old model.”
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