19
Nov
Seasonal rise in mortgage lending
UK mortgage lending rose by 5% in October compared with the
previous month, according to a lenders' group.
However, the £13.5bn of gross mortgage lending recorded by
the Council of Mortgage Lenders (CML) was down 27% compared with a
year ago.
The group said that the month-on-month rise in lending was
typical seasonal activity.
But the type of lending has changed since the start of the year,
with remortgaging at "decade-low levels".
'Reasons to be cheerful'
Lending and house prices rose over the summer and have remained
relatively stable in recent months, although they had been at very
low levels as a result of the credit crunch.
The Bank of England's own "Trends in Lending" report, also
published on Thursday, reported that more mortgages were approved
by major banks in October than in September.
"Recent weeks have provided some reasons to be more cheerful
about the state of the UK economy and housing market. We are now
likely out of recession," said CML economist Paul Samter.
However, any future rises in mortgage lending were likely to the
result of seasonal factors rather than a fundamental shift in
sentiment, he said. Generally, people are less likely to be buy a
new home in the run-up to Christmas.
"We remain sceptical how much further housing and mortgage
market activity can improve from current levels. As a result, we
also expect only a modest improvement over the course of next
year," Mr Samter said.
In the coming months, the year-on-year comparison of mortgage
lending is set to show less dramatic declines as lending volumes
dropped sharply in the latter part of 2008 and early 2009.
Mortgage shift
The CML did note a marked trend in the type of lending being
offered. House buying activity has picked up significantly since
the start of the year. In contrast, remortgaging has dropped to
levels as low as any seen in the last 10 years.
Borrowers had "little incentive" to remortgage when the current
fixed-rate deal came to an end, the CML said, choosing instead to
automatically pay the low standard variable rate with interest
rates so low.
Others found themselves unable or unwilling to remortgage
because their equity had shrunk owing to the sharp fall in house
prices at the turn of the year.
Interest rates are expected to remain low in the coming
months.
Buyers return
Both the Bank of England and the CML said that the number of
people falling into arrears on their mortgage repayments was lower
than expected - partly as a result of consistently low interest
rates.
Last week, the CML revised its forecast for the number of homes
that will be repossessed in 2009. If its prediction is accurate,
this will see repossessions rising by just 8,000 compared with
2008, with 48,000 homes being repossessed.
A belief that house prices have no further to fall has prompted
some house buying activity, according to Andrew Montlake, director
of mortgage broker Coreco.
"There is clearly an appetite to buy before prices become
further out of reach. The estate agents we deal with are reporting
that there has not been the usual dip in demand at this time of the
year, which is doubtless a reflection of this."
At the end of the year, the threshold for the 1% stamp duty to
be paid will revert to £125,000 from the current temporary
floor of £175,000.
SOURCE: www.bbc.co.uk/news Thursday
19th November 2009