2012 mortgage market ends on a high

It’s not all doom and gloom for the UK housing market, according to the Bank of England, as mortgage lending increased towards the end of 2012.
First time buyers will be forming an orderly queue on the back of the news that mortgage approvals and lending is on the up, and things are looking brighter for 2013 as well.

Figures from the Bank of England show that mortgage lending hit £12.4 billion after the fifth consecutive monthly rise.

Mortgage lending bounced back in December with the number of loans approved reaching the highest levels in almost a year.

Some 55,785 homebuyer mortgages were approved during the festive month against the 50,058 for the previous six months. This marked the fifth consecutive monthly increase and the highest number since January 2012.

The government’s new Funding for Lending scheme, which launched in August to give banks more flexibility to lend to businesses and consumers, has already positively influenced the housing market.

Speaking to The Guardian, Adrian Anderson, director of mortgage broker Anderson Harris, said: “The number of people taking out new mortgages continued to rise in December, reflecting what we are seeing in the marketplace.

“The government’s Funding for Lending scheme continues to make more money available at cheaper rates to lenders, and this is trickling through to borrowers.”

Whilst lending on secured properties increased by £1 billion, compared to the previous six-month average of £0.4billion, the gap between gross lending and repayment still remains narrow.  Some £12.4 billion was advanced by lenders but only £11.9 billion was repaid.

The Building Societies Association (BSA) said that new lending by its members increased by 30% in 2012.

“Mutual lenders are likely to continue to play a prominent role in the mortgage market in 2013, helped in part by the Bank of England’s Funding for Lending Scheme,” said Adrian Coles, director-general of the BSA.

The Bank of England predicts that lending will ‘significantly’ increase in the first three months of this year.

Earlier this month, figures from the HM Revenue and Customs show that house sales in the UK rose by 5% last year.

More government schemes

Off the initial success of the Funding for Lending scheme come two new schemes by the government to help investors to provide new homes for rent.

Chief Secretary of the Treasury Danny Alexander and Housing Minister Mark Prisk have announced that the government will pump £10 million into investors’ pockets so they can expand the private rental sector and build new affordable homes.

The ministers said they will use the government’s ‘hard-earned fiscal credibility’ to fund the schemes. The schemes were initially announced in September, however the government is now setting out eligibility requirements and how the guarantees will be structured.

A separate scheme will also be available to support new housing projects, aiming to develop up to 15,000 new homes, on top of the government’s existing house-building programmes.

Housing Minister Mark Prisk said:

“We’re introducing groundbreaking measures to unlock the vast, untapped potential for growth in the private rented sector. Investors will now be able to draw upon low-cost lending so they can bring thousands of new homes into the market.

“The housing guarantee schemes will help to get spades in the ground, create jobs, and establish new business models that will ensure the private rented sector continues to grow and more affordable homes are delivered.”

This is the government’s answer to the current housing affordability shortage the nation faces. Horribly high rents and tight lending restrictions have left a generation of renters unable to buy their first home.

For those who did buy during the heydays of the UK housing market before the economic crash, they now face a negative equity trap.

First time buyers

Lending is on the up and so are house prices, meaning that activity is beginning to pick up again. However, there are major ‘causes for concern’ over the lack of first time buyers in the UK from one leading broker.

Nationwide Building Society has voiced its issues over a diminishing number of first time buyers in the country. It said there were now around 20,000 first time buyers a month snapping up properties compared with 32,000 before the financial crisis hit.

Housing charity Shelter blames record high rental prices for preventing people from saving to buy their own property.

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