Mortgage lending dips but house price growth is expected to accelerate

21st May 2015


New figures show gross mortgage lending eased in April but the underlying market trend is beginning to look more robust, with house prices now expected to rise by more than originally anticipated in 2016.

Trade body, the Council of Mortgage Lenders (CML) reported that gross mortgage lending edged down 0.8% month-on-month in April to £16bn and was off 4.2% on a year-on-year basis.

However, the CML pointed out that April’s dip followed a marked increase of 18.4% month-on-month in March. Mohammad Jamei, CML economist said: “Overall, we now seem to be on the cusp of a modest lending recovery. Household finances are generally improving as earnings growth continues to outstrip inflation, and mortgages are being offered at extremely competitive rates. As a result, we expect to see stronger lending in future months.”

Following the publication of the CML’s latest stats, research group IHS Global Insight declared it was lifting its forecast house price increase in 2015 to 6% from 5%, partly it said due to the increased upward impact on prices coming from a lack of properties on the market.

Howard Archer, chief UK and European economist at the group added: “We also suspect that the housing market will benefit from reduced uncertainty following the decisive general election result.

“We believe that housing market activity is now turning around gradually after losing appreciable momentum from the early-2014 peak levels, and we see activity picking up modestly over the coming months.”

Notably, the Bank of England’s latest credit conditions survey released in early-April, reported that lenders expect demand for mortgages to pick up in the second quarter.

In addition, limited supply of houses is currently providing increasing support to house prices. The latest Royal Institution of Chartered Surveyors  survey reported that new instructions in April were at the lowest level since May 2009.


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