Mortgage lending reached an 11-month high in 2012, according to the Council of Mortgage Lenders (CML).
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The upwards trend, driven by the Bank of England’s £80bn Funding for Lending Scheme (FLS), which gives lenders access to cheaper finance, is set to spill over into 2013.
According to the BoE’s latest quarterly Credit Conditions Survey, the amount of credit made available to households and businesses has increased significantly, and banks and building societies expect to gear up lending even more in the first three months of the year.
The availability of secured credit to households hit a five-year high in the final three months of 2012, clearly showing that efforts to free up credit are working.
The survey also unveiled some long-awaited good news for first-time buyers: banks and building societies ramped up lending to borrowers with smaller deposits and plan to increase their maximum loan-to-values.
The FLS, which was launched in August 2012, increased lending to households and business and has allowed mortgage lenders to lower their rates.
Although those with larger deposits were generally treated to the lowest rates, first-time buyers (typically with smaller deposits) accounted for two-fifths of all house purchase loans in 2012, according to research by Halifax.
The findings are solid reassurance for the Government and BoE that the scheme is having a positive impact.
“Lenders noted that the FLS had been an important factor behind this increase, consistent with a reported easing in wholesale funding conditions, pushing up significantly on credit availability,” the BoE said.
In addition to a recent increase in mortgage approvals to home buyers, according to figures from the British Bankers’ Association (BBA), the CML predicted that the housing market will “feel more stable and positive” in 2013.