Lenders pledge £38bn in Q2 for new lending
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The mortgage market appears to be on the up, with lenders pledging £38bn for new loans and purchase lending increasing for the first time in two years.
Lenders have supplied data to the Financial Services Authority which shows that a total of £38bn was pledged during Q2 2009 for future loans to house movers, remortgagers, first-time buyers and borrowers wanting to obtain further advances.
This is £10bn more than was promised by lenders at the same time last year.
The FSA says: “The strong improvement in new commitments suggests the market has stopped falling and may now be picking up, spurred on by lower interest rates and improved confidence among borrowers.”
New advances increased by £1bn to £33bn in the three months to June.
But this is still 53% down on the £72bn of new advances seen at the same time last year.
The data also reveals that new lending for purchases has overtaken remortgages for the first time since the end of 2007.
House purchase lending represented more than half of all new advances in Q2 at 51%, and 55% of new lending commitments.
The latest survey from the Council of Mortgage Lenders also supports the strength of purchase lending.
Out of a total of £14.5bn gross lending for July, some £7.5bn was for purchase loans, the CML reveals.
The trade body also notes that July’s rise in house purchase lending was to more movers than in June, when the largest rise was seen in first-time buyer activity.
There were 20,400 first-time buyer loans and 35,700 home mover loans in July - up 18% and 28% respectively compared with June.
Paul Samter, economist at the CML, says that despite the positives there is still cause for concern.
He says: “It is tempting to call the turn in the mortgage market at this point and there is concrete evidence that lending for house purchase is increasing.
“But there are still constraints affecting the industry’s capacity to fund increased lending, as well as less consumer motivation to remortgage. The lending picture is likely to remain subdued for some time, especially as the wider economy is far from robust yet.”
