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CML: Summer mortgage lending a ‘little more lively’

  • 17/09/2015
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Cash property purchases remain strong but after a summer uptick, the Council of Mortgage Lenders (CML) reported a sharp surge in mortgage lending year-on-year.

The mortgage lender trade body estimated gross mortgage lending could hit £20bn in August, up 12% on last year, although 36% of the market remains cash buyers.

CML chief economist Bob Pannell, said the underlying seasonally adjusted picture in August suggests the strongest lending for seven years.

“While some of this improvement reflects an increase in typical loan sizes associated with firmer house prices, business volumes have strengthened too,” he said.

Bank of England figures, which span buy to let and residential, show purchase approvals on an upwards drive since late last year with 69,000 transactions in July.

Remortgage approvals have been improving modestly for more than a year, with more than 38,000 remortgages approved in July. Although such levels are not dramatic, recent months nevertheless represent the strongest showing for remortgages in over six years.

The buy to let and remortgaging sectors represent the strongest growth this year.

Prospects for the UK economy look relatively benign, observed Pannell, despite the fact that developments in China have added to global downside risks. The Bank of England kept interest rates at a record low of 0.5% in September, for the 66th consecutive month, with only one MPC member – Ian McCafferty – voting for a rise.

Expectations of an interest rate rise have pushed out further into 2016 in recent weeks and all eyes are on the U.S. Federal Reserve which appears to be on the brink of an increase.

Buoyed by the benign economic backdrop and attractive mortgage deals, the latest RICS survey confirmed new buyer enquiries were up for the fifth month-in-a-row. However, the demand-supply imbalance is spurring on house price growth, as sellers decline as buyer demand rises, which brought a limited pick-up in sales activity.

Henry Woodcock, principal mortgage consultant at IRESS, said: “In the longer term, affordability will remain the key constraint for the market, preventing more rapid improvement. While wage growth is still showing promising growth, it is being outstripped by rising house prices, and we won’t see this growth subside until the supply and demand balance is addressed.”

John Eastgate, sales and marketing director of OneSavings Bank, added: “Buy-to-let lending remains healthy, and conditions are supportive for homeowners too, with mortgage rates still near the bottom, while we are also seeing a return of low deposit products, which will support activity. Yes, house price growth will continue to stretch affordability, so it’s encouraging that wage growth is accelerating, although that does, of course, bring with it inflationary pressures and the prospect of interest rate rises.”

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