Lending Improving But Still Below Average

Mortgage lending in the UK is increasing but it is still falling below the historic average. According to the Building Societies Association (BSA), there are sustained signs of recovery within the market...

Mortgage lending in the UK is increasing but it is still falling below the historic average. According to the Building Societies Association (BSA), there are sustained signs of recovery within the market, with Building Societies and mutuals playing an active role throughout August. Gross lending was up 32 per cent during the month to GBP 4 billion. This is up from GBP 3 billion in August 2012.

For the first eight months of the year gross lending stood at GBP 26.1 billion - a 30 per cent jump year-on-year. Building societies and mutuals increased their share during this time to 24 per cent. This is a three percentage point gain from the same time the year previous. Of the loans advanced in August by mutuals, one in three were to first-time buyers, equating to 9,000 loans. Importantly, 29 per cent of these loans were advanced to borrowers with a deposit of ten per cent or less.

When repayments and redemptions are taken out of the calculations, net mortgage lending stood at GBP 1.4 billion in August. This is 71 per cent greater than the same month last year. New net lending was GBP 8.2 billion for the first eight months of the year, up 87 per cent year-on-year. This figure offsets lending by other bodies and means UK total net lending stands at GBO 5.6 billion.

Adrian Coles, director-general of the BSA, commented: "Mutual lenders have sustained their activity in, and support for, the UK housing market and home-buyers over the long-term. Consumer sentiment has now clearly turned the corner and is beginning to improve. However, sentiment can be fragile and it is vital that unexpected surprises and overheated rhetoric are avoided."

Nevertheless, when put into context, the number of loans advanced for house purchase over the last three months is still less than two-thirds of the historic average, at just 60,000 per month (approximately). The BSA claims creating more homes will be key to address this, loosening pressure on existing supply and encouraging lending.

Will more homes really ease the market? We do some number crunching with 40 years of house market data.

- Thursday 03 October 2013

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