Commenting on market conditions in this month's Market Commentary, CML chief economist Bob Pannell observes:
"Our forward estimate is that gross lending in April was £12.1 billion. This would have been 4% up on March. The comparison with April last year – 21% higher – is flattered by the temporary dearth of house buying activity immediately following the closure of the stamp duty concession.
The true underlying position is that April is likely to have been one of the strongest months for lending activity since late 2008, but not as strong as the year-earlier comparison suggests. Gross lending on a seasonally adjusted basis has been running comfortably above £12 billion for several months, but this is still barely half the average level of lending seen in 2003-4."
Housing and mortgage markets
Improvements in funding market conditions, as augmented by the funding for lending scheme, have benefitted the pricing and availability of mortgages.
The eventual impact on activity levels does of course depend upon how much borrower demand there is.
With respect to remortgages, the pick-up in demand signalled in recent credit conditions surveys has proved elusive for the time being at least. Our Regulated Mortgage Survey figures show 68,000 remortgage loans in the first quarter, the lowest figure since 1997.
But Bank of England approvals data do begin to finally suggest that the underlying position may now be improving. The seasonally adjusted number of remortgage approvals climbed in both February and March, and has totalled more than 30,000 for the first time in nearly a year.
By stark contrast, there are clearer signs of improvements to house purchase transactions, and particularly first-time buyer activity.
Calibrating the true extent of the pick-up is a little more problematic, however, because seasonal factors are significant in the early months of the year and also because the pattern of lending a year ago was distorted around the end of a stamp duty concession for first-time buyers in March 2012.
According to the Bank of England, gross mortgage lending climbed by 9% to £11.6 billion in March, almost exactly reversing the seasonal dip in lending in February. But gross lending was 8% lower than a year ago (reflecting those stamp duty distortions).
Our forward estimate is that gross lending in April was £12.1 billion. This would have been 4% up on March. The comparison with April last year - 21% higher – is flattered by the temporary dearth of house buying activity immediately following the closure of the stamp duty concession.
The true underlying position is that April is likely to have been one of the strongest months for lending activity since late 2008, but by no means as strong as the year-earlier comparison suggests. Gross lending on a seasonally adjusted basis has been running comfortably above £12 billion for several months, and this is still barely half the average 2003-4 level of lending, for example.
House purchase activity has been fairly strong over recent months, as measured by advances and approvals. Although year-earlier comparisons are rather distorted, as above, the underlying position looks resilient. The seasonally adjusted number of house purchase approvals reached 54,000 in March - the strongest March outturn since 2008 and the seventh month in a row that approvals have been above 50,000 (but again only about half the volume of activity seen in 2003-4).
Regulated Mortgage Survey figures continue to show first-time buyers performing strongly. First-time buyers have accounted for an increasing proportion of all house purchase loans in recent months - increasing to 45% in March from 43% in February.
Taken overall, house purchase activity in the first quarter was 5% lower than a year earlier. Despite the obvious boost to first-time buyer numbers a year ago, first-time buyer lending was only a little shy of year-earlier activity levels whereas loans to those moving house were 5% lower.
Meanwhile, our first quarter figures show that buy to let lending activity is making steady rather than dramatic progress. Gross mortgage lending of £4.2 billion across 33,500 mortgages was advanced to buy-to-let landlords in the first quarter of 2013. This compares with £4.6 billion the previous quarter, and £3.7 billion a year ago. Lending for house purchase by landlords represents a little under half of overall lending and shows a similar profile.
Brian Murphy, head of lending at Mortgage Advice Bureau (MAB), comments on the April mortgage lending figures from the CML:
“We shouldn’t be put off by the end of the stamp duty holiday affecting year-on-year comparisons. A 4% boost to mortgage lending since March this year makes April one of the strongest months in the last four years, and we also saw a 10% monthly spike in mortgage applications during April including 13% more interest from homebuyers.
“The government's interest in the housing market has put property back in the spotlight and drawn attention to the attractive deals that are out there. Average five year fixed rates reached 4% in April, which is the lowest they have been since the recession. The publicity around Help To Buy has already prompted a surge of interest in new build property, and people looking to sell their homes are also unlikely to find a shortage of willing buyers provided they are sensibly priced.
“While it is true the housing market is making steady rather than rapid progress, positive figures for purchase activity and first-time buyers are especially encouraging as they show that attention is beginning to focus where it is needed the most.”
Duncan Kreeger, director at peer-to-peer lender West One Loans, comments,
“Far from recuperating, the biggest lenders are still reeling from a crisis that struck over five years ago. Gross mortgage lending in the last twelve months represents only 40% of the 2007 level. But even this meagre flat-lining has only been possible thanks to huge subsidy. Strong comparisons with a year ago only reflect just how dependent the high-street lenders are on government support.
In particular, business lending is still thoroughly submerged in the crisis, having seen negative growth since 2011. That’s part of the reason why – at £1 million pounds a day – alternative business finance has already outpaced Vince Cable’s latest £300 million pound ‘business bank’ offering by 20% this year. Traditional finance is undergoing a process of disintermediation – a process that could be terminal for certain old ways of doing things, but a trend that could also provide a much more solid foundation for the future of finance.”
David Newnes, director of LSL Property Services, owners of Your Move and Reeds Rains, comments:
“April’s mortgage figures are the strongest for 5 years, and a sign the mortgage market is gradually being reknit after being torn apart during the financial crisis. The UK’s housing market is showing signs of growing stronger, boosted by greater consumer confidence in the market and wider economic recovery in Britain. Mortgage lending has been helped by the Funding for Lending scheme, which is opening the door to more first-time buyers who were shut out of the market by tight criteria and high deposit requirements. However, the path to a full recovery will be long and winding. Gross lending is still less than half what it was in April 2008. But demand is improving, cheaper mortgages are available, and lenders are competing for business which is driving down rates and making mortgages more affordable.”
Paul Hunt, managing director of Phoebus Software said:
“April mortgage lending figures are the strongest we have seen to date since the financial crisis in April 2008. The market is gaining real confidence thanks to the substantial improvement in gross mortgage lending over the past twelve months. There has been a boost in competition within the mortgage market thanks to the Funding for Lending scheme, which has encouraged banks to make mortgages more accessible to high LTV borrowers. Added to that, the Help to Buy scheme will augment the recovery even further, and help keep it firmly set on the way to a fuller recovery.”
