Improvement predicted for mortgage market in 2014

The housing and mortgage markets are set to continue to show greater levels of activity in 2014, according to the latest forecasts from the Council of Mortgage Lenders.

However, the CML sees an unbridled housing boom as unlikely. Indeed, given the already stretched nature of household finances, the new regulatory environment and the likely future course of interest rates, housing market activity may well ease back of its own accord.

The CML is forecasting a rise in gross lending from an estimated £170 billion this year to £195 billion next year, and £206 billion in 2015. The CML anticipates that net advances are likely to rise from £10 billion this year to £15 billion next year and £20 billion in 2015.

The CML anticipates that the number of mortgages 2.5% or more in arrears is likely to stay stable next year at around 150,000, but rise modestly to 160,000 in 2015. The number of repossessions is expected to fall from around 30,000 this year to 28,000 next year before returning to 30,000 in 2015.

In terms of specific features currently influencing the mortgage market, the CML suggests that the volumes of business written under the new Help to Buy mortgage guarantee scheme may be relatively modest, “such that it has a smaller but more positive market impact than many commentators suggest”.

The CML’s forecasting horizon covers a period when the Bank of England may consider increasing interest rates. While this is likely to have a greater impact from 2016, the benign period of falling arrears and possessions may be coming to an end – although most households will cope with the transition to more normal interest rates.

CML chief economist Bob Pannell concludes: “Gross mortgage lending climbs above £190 billion next year, its highest level since 2008. While this is largely on the back of the continuing revival in housing market activity, we also expect to see a meaningful turn-round in re-mortgage activity.

“Despite a strong pick-up in gross mortgage lending, we have pencilled in relatively modest net lending figures – £15 billion in 2014 and £20 billion in 2015. While this would mark a climb out of the sub-£10 billion doldrums, where the market has languished since the credit crunch, it does nevertheless represent a rather muted position. This reflects, among other things, our view that some households will use the relatively benign economic conditions to prioritise debt repayments, ahead of medium-term interest rate rises.

“We think there are good grounds to be optimistic that the vast majority of households will cope with a slow but certain transition to more normal interest rates. This seems to be the game-plan which the Bank of England has in mind, but presumes (as we do) that the UK avoids a destabilising housing boom over the next few years.”

Lending for house purchase reaches a six year peak

The Council of Mortgage Lenders (CML) found that September saw an Increase by a significant 34 per cent in first-time buyer lending, with 23,600 taking out home loans, compared to the same month last year and despite a decline of 12 per cent from August.

The typical first-time buyer income multiple continued an upward trend as they typically borrowed 3.39 times their gross income. Despite this, the continued downward drift in mortgage interest rates have kept borrowers’ payment burden low.

Overall the usual seasonal dip seen in mortgage lending in September was no different this year but was up by 20 per cent compared to the same month last year, with lending in the third quarter at its highest since 2007.

There were 52,800 loans for home owner house purchase in September with a total value of £8.4 billion, down by 14 per cent on August. Overall in the third quarter of 2013, there were 170,700 house purchase loans advanced, worth a total of £27.1bn, which is the highest quarterly figure since the fourth quarter of 2007.

Loans advanced to home movers totalled 29,100 in September, which was down in volume by 16 per cent compared to August but up by 11 per cent compared to September last year. Home mover loans totalled £5.2bn in value in September, which was down 13 per cent on August but up 18 per cent compared to last year.

Home-owner remortgaging showed strong growth in September with a total of 32,900 remortgage loans advanced in the period, up 20 per cent compared to August and 36 per cent on September last year. This totalled £4.7bn in value, an increase of 24 per cent on August and 47 per cent in value compared to September 2012.

Buy-to-let lending in the third quarter of 2013 grew with 43,900 loans advanced in this quarter which was up 16 per cent on the second quarter of 2012 and 36% compared to last year. These loans were worth £5.7bn which was up 19% on the previous quarter and 43% up compared to the same period last year.
Director general of the CML Mr Paul Smee, was quoted saying,: “First-time buyers were a key driver in the first half of 2013 but now home movers and remortgages are showing renewed strength which puts the market in a good position to continue momentum into the final few months of 2013 and the New Year.”
Managing director of Phoebus Software Mr Paul Hunt had said,: “By almost any measure you use, it’s clear that lending levels improved drastically in the last few months. The mortgage industry has found a way to sustainability and significantly boost activity in the property market.

“There are many new signs of life: house purchase lending is up by a fifth compared to a year ago and first-time buyer activity has jumped significantly. Lenders have been proactive in their approach to lending and their innovative steps to improve mortgage availability have heated up the mortgage market. Some of the roadblocks are being knocked off the pathway for prospective buyers, and the number of mortgage deals on the market has increased rapidly. As the Help to Buy scheme gains momentum it should kick-start the housing market from the bottom tier. Without doubt, the mortgage market is taking steps towards fertile grounds.”

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CML announce: Lending to first-time buyers increased in February

First-time buyers increased

The number of first-time buyers increased by 3 per cent in February, marking the best start to a year since 2008, according to the Council of Mortgage Lenders (CML). Activity in the first-time buyer sector was 17 per cent stronger in February than in February last year, and combined with January reached the largest number of first-time buyers in the first two months of the year since 2008. Lending to home movers fell – contributing to an overall dip in house purchase lending – while remortgage lending also eased.

First-time buyers

A total of 16,400 loans were advanced to first-time buyers in February, up on 15,900 in January and 14,000 at the same time last year. By value, loans to first-time buyers totaled £2 billion, the same amount as the previous month, but 18 per cent higher than in February 2012 (1.7 billion). First-time buyers accounted for 43 per cent of all house purchase loans in February. This was the sixth consecutive month that this indicator has been at or above 40 per cent, suggesting that market conditions continue to improve for first-time buyers. Indicators of loan affordability also suggest that the market was marginally more favourable for first-time buyers in February.First-time buyers typically borrowed a smaller amount in February than in January, both in absolute terms and relative to their income. First-time buyers typically borrowed 3.19 times their income in February, down from 3.2 times in January, while the average loan-to-value ratio remained at 80 per cent. This is likely to be associated with a shift towards the purchase of less expensive properties by first-time buyers, with a small increase in the proportion of properties bought for less than £125,000.

Home movers
Lending to home movers fell in February for the third consecutive month. A total of 21,500 loans were advanced to borrowers who moved in February, down by 4 per cent compared to January and a fall of 3 per cent on February last year. By value, home movers were advanced 3.5 billion in February, a 5 per cent fall compared to January.

House purchase lending
The underlying trend for resilient house purchase lending continued in February, with lending stronger than a year earlier. A total of 37,900 loans (worth £5.5 billion) were advanced in February, up by 5 per cent on the same time last year (36,400 loans). Month on month, house purchase lending dipped in February compared to January when 38,200 loans were advanced.

Remortgage lending

Remortgage lending remained subdued in February, down compared to both the previous month and February 2012. In February, £2.6 billion was advanced to borrowers remortgaging, a 13 per cent fall compared to January (3 billion), and 28 per cent lower than February last year (£3.9 billion).

Director General of CML, Paul Smee, Commenting on the data, saying: “First-time buyers are continuing to take advantage of more favourable market conditions, helping to drive the underlying trend for resilient house purchase lending. We hope that the new initiatives announced by the government in the 2013 Budget will further stimulate first-time buyer activity but also help those ‘second steppers’ looking to move into a new or existing home.”

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