We have a resurgent UK mortgage market but it is not yet a normal mortgage market. While most accept the £356bn of gross lending in 2007 was excessive, they are also agreed the £138bn to £144bn seen from 2009 to 2011 was abnormally low.
The return to circa £200bn in 2014 and 2015 is an improvement but still short of the £250bn threshold many consider the base of normality.
It is not just gross lending that has shifted gear. A more important measure from a broader economic perspective is net lending. Real growth in the total of mortgage balances outstanding is more likely to fuel house price inflation.
The more often quoted gross measure is a proxy for market activity, as it drives estate agency, solicitor instructions and valuations – the wider property economy. However, it is the net rate we should consider to debate the likely impact of initiatives on house prices and the wider market.
With UK residential property assets now totalling £5.75trn, the £1.3trn of outstanding mortgage debt looks small.
The fact this asset value has grown by £966bn in the last five years at a time when net mortgage lending has grown by less than £50bn indicates it is not increasing mortgage lending that is the main driver of rising UK property prices.
The volume and value of cash buyers appears to be the main driver of HPI. It is for these reasons any attempts by the Financial Policy Committee to curb house price growth, with loan-to-income or debt-to-income caps, are likely to fail.
Indeed, all this will do is limit the ability of genuine purchasers who can afford and want to buy from getting on the housing ladder.