2012 has certainly seen improved levels of lending from building societies and other mutuals. By the end of October the sector had seen gross mortgage lending of £26bn, an increase of 34% on last year.
In terms of net mortgage lending the sector had lent £5.6bn in the year to October which equates to a staggering 86% of total net lending in the year so far.
This has been a strong year for the sector but have mutuals actually played a part in dealing with the challenges facing first time buyers and those homemovers with smaller deposits?
Well, as a proportion of lending to homebuyers, the sector has lent 43% to first-time buyers and 33% to those borrowers with less than a 15% deposit. According to Moneyfacts, mutuals also currently provide 58% of loans at 95% plus loan-to-value.
The Bank of England’s Funding for Lending Scheme is bringing down the cost of funding for some mortgage lenders and to date mutuals have targeted much of this lending at the higher loan-to-value market whereas some banks have tended to use the funding to attract greater levels of business from those borrowers with substantial deposits or equity.
Overall, the supply of residential mortgage lending is getting better and this improved supply is starting to have an impact in areas where there has been market failure in recent years. The outlook for the consumer demand side is somewhat more uncertain.
Raising a deposit, lack of job security and access to mortgage finance remain the three largest barriers for consumers, although access to mortgage finance being a barrier may be based more on perception than reality.
In September of those consumers that cited access to a mortgage as a barrier, only 7% had actually been turned down for a mortgage or had carried out their own research.
Many others hadn’t applied but said that the news, press, friends and family had said that lenders weren’t lending. Others were nervous about being turned down and thought that it might affect their future ability to transact if they were.
For 2013 the message has to be that the mutual lending sector is open for business. Many more borrowers are approved for a mortgage than are turned down and there is increasing finance available at higher loans to value.
Consumers should not be afraid of talking to mortgage lenders or brokers to assess whether there is a solution in the market for their housing needs. Indeed, many borrowers will find their solution in the mutual sector.
