Gross mortgage lending growth comes to a standstill

18th December 2014

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Gross mortgage lending fell a steep 9% month-on-month during November, flattening the annual growth rate as activity dropped back.

According to figures from trade body, the Council of Council of Mortgage Lenders, the amount of home loans granted during the month dipped 9.2% to £16.90m, providing further evidence that the housing market has come off the boil

Looking at the rate of deals being done, CML economist Mohammad Jamei said: “Current activity in the housing market has eased with transactions back down to levels seen almost a year ago.”

Notably the latest Royal Institute of Chartered Surveyors (RICS) survey reported a fifth successive fall in buyer enquiries in November and a fourth successive drop in agreed sales – the first declines since September 2012.

While Howard Archer chief UK and European economist at IHS Insight believes the recent Stamp Duty reform should have a beneficial impact on the housing market, he doubts it will cause activity and prices to see a major turnaround.

Jamei added: “The reform in stamp duty is likely to provide a modest short-term boost in activity over the next few months, but its impact will fade away in the medium term.

“We expect mortgage lending to grow in 2015 and 2016, but more slowly than this year. The gentle trajectory for the mortgage market should calm macro-prudential concerns.”

Archer however expects some pick up in housing market activity in 2015 from the recent lows.  He said: “We expect the increase in activity to be limited thereby keeping a lid on house prices increases. Specifically, we expect house prices to rise by a solid but unspectacular 5% in 2015 after a likely modest overall increase in the fourth quarter of 2014.”

Archer’s latest forecast contrasts starkly with the double-digit annual house price increases witnessed earlier this year.

In fact the latest numbers from Nationwide show annual house price inflation moderated to an 11-month low of 8.5% in November, down from 9% in October and the peak of 11.8% in June, the highest since January 2005.

Archer said: “Looking ahead, significant restraint on house buyer interest and prices is expected to come from more stretched house prices to earnings ratios, tighter checking of prospective mortgage borrowers by lenders and the prospect that interest rates will eventually start to rise in 2015. Even so, buyer interest in houses should be at a reasonably decent level going forward.”

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