Mortgage lending enjoys only modest gains in May but significant upturn potentially on the way

18th June 2015


Gross mortgage lending in May remained relatively static in comparison to the previous month’s total according to the Council of Mortgage Lenders but the organisation is anticipating “an upturn in lending over the coming months”.

The latest numbers from the trade body showed little change on April’s tally, after rising by 2% to an estimated £16.2bn but this was 3% lower than the £16.8bn of lending undertaken in May 2014.

The CML asserted however that forward indicators of lending, such as the Bank of England’s data on approvals, suggested that the market can expect an upturn in lending over the coming months, reflecting its view that a modest recovery is under way.

CML economist Mohammad Jamei said: “The economic environment is one that should support increased activity in the near term, coupled with low mortgage rates. But while we expect these factors to support activity, there is a limited upside, driven mainly by affordability constraints.”

Howard Archer, chief European & UK economist at IHS Global Insight believes that housing market activity is now on the up after slowing markedly during 2014 and expects it to be firmer over the coming months.

He said: “This view was reinforced by the Bank of England reporting that mortgage approvals for house purchases spiked up in April – which was also the fourth increase in five months – to be at a 14-month high of 68,076.”

Presently Archer forecasts that house prices will increase 6% in 2015 and then by a further 5% in 2016. But he added that there is “a significant upside risk to these forecasts coming from the current lack of properties coming on to the market”.

“We expect support for housing market activity to come from the recent Stamp Duty reform, current very low (in some cases record low) mortgage rates, strengthening earnings growth, rising employment and elevated consumer confidence. Under the Stamp Duty Reform enacted in December, it is estimated that 98% of house buyers will now pay less stamp duty. Furthermore, it currently looks probable that the Bank of England will hold off from raising interest rates until the first half of 2016,” he added.

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