Election dampens lender enthusiasm

26 April 2010

Economic Tracker

GRENVILLE TURNER, GROUP CHIEF EXECUTIVE OFFICER, COUNTRYWIDE

The UK’s first televised political debate left the public divided and last week’s second instalment did little to dampen speculation that we’re heading for a hung parliament. Much has been written about the election and its impact on the economy but we are living in uncertain times.

While Countrywide’s panel mortgage applications grew for the third consecutive month in March, reaching levels not seen since February 2008, there’s still time for the market to change in the lead up to May 6.

Indeed, headline figures from the Council of Mortgage Lenders’ March report include a 24% increase in gross lending, which certainly looks positive. But overall lending for Q1 declined by exactly the same amount, falling 24% compared with Q4 2009 - the lowest quarterly lending total recorded by CML since 2000.

This highlights how key indicators can contradict themselves and how the market has fundamentally changed since the last election.

From a lettings perspective, demand is outgrowing supply as the next generation of would-be home owners struggle to fund the required deposits.

A record 48,332 new tenants registered for rental accommodation with Countrywide in the first three months of the year, with 4.9 tenants vying for every property.

This increased rental demand is adding pressure to the UK property register, causing some to speculate that mortgage affordability is still a key issue causing thousands to turn to rental accommodation.

Lenders have a role to play to fill this demand by better supporting buy-to-let finance but election uncertainty is always a sure-fire way to dampen lender appetite in any market.

UK unemployment also remains an area of concern for many with increased inflation bound to impact commodities and the general mood of the economy.

We all know that every headline will bring a different factor into play but with just a couple of weeks remaining until polling day it will be interesting to see if lenders can give the market what it desperately needs - a wide selection of competitive products with deposits that buyers can reasonably accumulate.