Mortgage lending hits highest levels since January
Thursday, November 29, 2012
Published by AMY LODDINGTON
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According to the latest Bank of England lending report, mortgage approvals rose again in October to 29,358 and the number of loans for property purchases went up to 52,982.
The total value of the loans increased slightly from £12 billion to £12.1 billion.
Remortgage approvals also increased to 29,358, significantly above the previous six-month average of 27,602, and new house purchases and remortgage levels increased for the third consecutive month.
Net lending to individuals fell in October as consumers repaid advances of £0.5 billion in October, in sharp contrast with September’s figures which showed an increase in lending of £1.1 billion in unsecured credit. However, lending over the 12-month period showed growth of 0.6%.
Jonathan Harris, director of mortgage broker Anderson Harris, says:
“The uptick in lending in October reflects a busier housing market, while the number of homeowners remortgaging also increased as better mortgage rates filtered through as a result of the Funding for Lending Scheme.”
“While the FLS is pushing down money market rates, which is good news for all borrowers, the very best mortgage rates are still targeted at those with the biggest deposits and similar levels of equity in their homes. It is great news for these borrowers that they are so well catered for but those with far more modest deposits are crying out for better rates.The deposit is the biggest single barrier to home ownership, with first-time buyers having to delay getting onto the housing ladder until they are well into their thirties if they can’t call upon the Bank of Mum and Dad to help.
“However, we do expect the FLS to filter through to those with more modest deposits next year, resulting in lower rates at high LTVs, which will give the housing market a much-needed kickstart.”
Richard Sexton, director of e.surv chartered surveyors, commented:
“Life has become marginally easier for mortgage borrowers over the last two months, but at the moment it’s only a margin of small degrees. Rates have fallen fractionally, and it has become slightly easier to access high LTV mortgages. But it’s not yet a dramatic sea-change in conditions by any stretch of the imagination.
“Let’s be clear: it will take a sustained focus on improving first-time buyer lending to really get the mortgage market moving, but at the moment lenders don’t have the capacity to do it. Funding for Lending has allowed banks’ to lend more prodigiously, but it’s effect on first time buyer numbers has been negligible. Lending to borrowers with a deposit of 15% or less accounted for less than 1 in 10 of all house purchase loans in October, and high LTV lending is still trawling the depths we’ve been used to post-2008. Lenders are more comfortable targeting lower LTV borrowers and keeping criteria on higher LTV mortgages fairly restrictive. That said, any uptick in lending volumes must be applauded and bodes well for early 2013.
“The negative side of FLS is that is has encouraged lenders to reduce their savings rates because they’re less reliant on savers’ deposits to fund new loans. Savings rates have fallen to an average of around 2.4%, which is making building a deposit even more painstaking for first-time buyers.”
Sean Oldfield, CEO at Castle Trust, was positive about the future of mortgage lending:
“Funding for Lending is starting to deliver real benefits and should help increase total lending for 2012 and into next year. Any initiative that aims to boost lending in this difficult environment should be welcomed. The focus of banks and building societies has to remain on creditworthy customers and the Bank of England figures showing that loan approvals for house purchases has risen by £0.2 billion in October appears to bear this out. People applying for mortgages need to be properly advised and offered the full range of mortgage options.
“The scheme is encouraging mortgage lenders to develop new innovative mortgages and with new product numbers at their highest level since January 2012, this trend is set to continue as the sector becomes increasingly more competitive.”
Commenting, Adrian Coles, Director-General of the Building Societies Association, said:
“The lending figures seen today are further evidence that building societies and other mutuals are lending more to those looking to buy a home. Mutuals have accounted for 86% of all net lending in the UK in the year to October, which significantly outperforms other financial institutions. Around one in three loans made by mutuals are to first-time buyers.
“Mutuals are also offering more competitively priced products. The average mortgage rate offered by mutuals in October was 4.18% compared to 4.39% across the market. Rates have also come down a little further in November which is potentially early evidence of the impact of the Bank of England’s Funding for Lending Scheme.
“Savings balances at mutuals fell marginally in October. Households are still facing headwinds such as above-target consumer price inflation which increased unexpectedly to 2.7% in October. According to the Bank of England inflation is now unlikely to fall back towards its 2.0% target until the end of 2013. Conditions in the labour market are however improving, which should help alleviate some pressure on household budgets.”
courtesy of financialreporter