Mortgage lending jumps 30% but we’re still way off boom days says trade body

19th December 2013

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Mortgage lending jumped by almost a third over the past 12 months but despite the leap the UK market is still some way off the previous boom, according to trade body the Council of Mortgage Lenders (CML) writes Philip Scott.

There was an estimated £17bn of gross mortgage lending in the UK last month, representing a 4% dip on October’s £17.6bn but a 30% rise on November 2012’s total of £13bn.

The CML now anticipate that gross lending will reach £170bn overall in 2013, significantly higher than the £156bn it originally forecast, but still a far cry from the £363bn experienced at the height of the lending boom in 2007.

CML chief economist Bob Pannell says: “New rules hardwire in a more risk-averse lending environment for the future and so, while we expect lending to rise in line with better economic conditions, the next two years are unlikely to see lending levels getting very far above £200bn a year.”

In addition this week, the Office for National Statistics said UK house prices jumped 1.4% month-on-month and up 5.5% year-on-year in October. Howard Archer, chief UK and European economist at IHS Global Insight says a sharp acceleration in house prices is likely to fuel concern that the UK could be headed for a new housing market bubble.

He adds: “Indeed, there is a very real risk that house prices could really take off over the coming months, especially if already significantly improving housing market activity and rising buyer interest is lifted appreciably further by the ‘Help to Buy’ mortgage guarantee scheme which was launched in October.

 “Consequently, the decision of the Bank of England and the Treasury to end Funding for Lending support for lending to households from January looks a highly sensible decision, although in itself it is unlikely to act as a major brake on housing market activity. We believe that it is very important that the Bank of England has indicated that it is prepared to take further action to rein in the housing market if prices rise markedly amid ongoing strengthening activity.”

Last week, Bank of England boss, Mark Carney remarked that the BoE is concerned about potential developments in the housing market and “that there is a history of things shifting in the UK and the housing market from stall speed to warp speed with underwriting standards slipping. So we want to avoid that”.

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