Gross mortgage lending up 15pc in August

The latest figures for gross mortgage lending reveal a 15% year-on-year rise in August, as lending reached £22.5 billion.

The Council of Mortgage Lenders (CML) has released its gross mortgage lending estimates for August. At £22.5 billion, lending rose by 15% year-on-year and was 7% higher than July’s lending total of £21.1 billion. Estimates for last month are also the highest since August 2007, when gross lending hit £33.6 billion.

In its Market Commentary, the CML states that while hard economic data following the referendum is still scarce, surveys point to a recovery in sentiment in August.

What the Council does see as a concern is the relatively low number of properties up for sale, citing this as a potential cause of a reduction in the number of transactions, if potential buyers struggle to find properties they want to purchase.

Noting that the stamp duty changes on second properties created a distortion in the first and second quarters of the year, the CML thinks that transactions in July and August should begin to show a more accurate reading of the market, meaning that we “could be starting to see a market where transactions are a little softer than they have been over the last few years.”

The buy to let market has been singled out by the CML as a sector where lending is moving more towards remortgage activity. House purchase activity for buy-to-let remains subdued, and is firmly down compared to a year ago. The CML believes that this trend is set to continue due to the fact that lenders have been tightening affordability criteria in anticipation of the forthcoming interest tax relief changes in April 2017.

In addition, the CML points to house purchases for first-time buyers and movers as also being more subdued, given that both fell in July on a monthly and annual basis.

Remortgage activity, on the other hand, is resilient and growth is predicted for the sector, as both home-owners and buy to let investors are being encouraged to take advantage of the cheaper mortgage deals currently available.

Commenting on the latest market commentary, senior economist for the CML, Mohammad Jamei said:

“Widely voiced fears in recent months about the housing market have proved to be wide of the mark. Prospects for house purchase activity post-referendum look slightly subdued, when compared to late 2015 and early 2016. However, sentiment in the market recovered in August. This is reflected in stronger-than-expected transaction figures, and in our gross lending estimate.

“This recovery in sentiment is likely to be down to a number of different factors, including the Bank of England’s monetary stimulus and its introduction of the Term Funding Scheme in August. A subsequent uptick in approvals is anticipated, albeit still at levels lower than earlier this year as affordability constraints and lack of properties on the market for sale continue to bear down on borrowers. The Bank also continues to indicate another rate cut on the cards, if medium term prospects remain unchanged.”

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