News Column

UK mortgage lending figures reach record high

July 18, 2014

Lisa Bachelor, theguardian.com



The amount of money lent to borrowers to buy properties was at its highest for eight months in June, according to the mortgage lending figures from banks and building societies.

The Council of Mortgage Lenders estimates that gross mortgage lending reached 17.5bn in June. This is 4% higher than May, 17% higher than June last year and the highest monthly figure since October 2013. Gross mortgage lending for the second quarter of this year was up 10% from the first three months of this year, said the CML, and this has increased by 21% from the second quarter of 2013.

However, the impact of new tighter mortgage lending rules and the possibility of a series of interest rate rise could lead to more subdued lending in the months ahead, said the CML. Last month the Bank of England'sFinancial Policy Committee announced that banks should check that new borrowers could afford their mortgages if interest rates were to rise by 3% over the first five years of the loan, and that there be a 15% limit on the proportion of new mortgages with loan to income multiples at or above 4.5 times.

CML chief economist Bob Pannell said: "The macro-prudential interventions announced by the FPC in late June are finely calibrated and precautionary, but could nevertheless tip the UK towards a more conservative lending environment. It is difficult to gauge the short-term direction for house purchase activity and mortgage lending more generally, given unknown regulatory impacts, regional differences and uncertainty as to when the first in a series of interest rate increases will take place."

At present, the proportion of new mortgages where the amount borrowed is at or above 4.5 income been about 11% of the market, said the CML, comfortably below the 15% threshold now proposed. However, some lenders who do not assess affordability using the interest rate rise stress test may be reluctant to change their business models, while others might decide to lend less than 15% of new mortgages to those with high loan to income mortgages.

"Any tightening of affordability metrics is likely to have more pronounced impacts on the London market and first-time buyers more generally," said Pannell.


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Source: Guardian Web


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