Highest monthly mortgage lending since October 2008

The Council of Mortgage Lenders estimates that total gross mortgage lending in May increased to £14.7. This is a rise of 21% from £12.2 billion in April and 17% higher than the total of £12.6 billion in May 2012. 

This is the highest monthly estimate for gross mortgage lending since October 2008.

Commenting on market conditions in this month's Market Commentary, CML chief economist Bob Pannell observes:

“The imminent change of guard at the Bank of England takes place against the backdrop of a modestly improving UK economy, albeit one that appears to rest upon a pick-up in consumer spending and a recovering housing market.

“Funding conditions, helped by the funding for lending scheme, continue to look favourable and are supporting more competitive mortgage pricing and availability and a gradual resumption of lenders’ risk appetite.

“While the direction of travel is clear and fits well with the more positive housing surveys from RICS and others, our forward estimate does imply somewhat stronger house purchase activity than we had been expecting. This may reflect a degree of pent up sales following the extended spell of poor weather earlier this year”.

Richard Sexton, director of e.surv chartered surveyors, said: “There’s finally some real energy and ambition in the mortgage market. Despite rising house prices, more buyers are accessing mortgages. Greater lending reflects returning confidence in the market. Even better news is that the increase in lending was powered by an increase in high LTV borrowers. First-time buyers in particular, have had a hard run of late. The sum they must save as a deposit to get onto the housing market is often crippling. Building the deposit is made all the more arduous by stubborn inflation, weak wage growth and low savings rates. But high LTV lending is 26% higher than last year. Lenders have been providing more support to high LTV borrowers, by offering a wider range of mortgages, and dropping rates.  Schemes such as Help to Buy offer further options. Now is the time for ambitious high LTV borrowers to get on the housing ladder.”

Mortgage lending by building societies up by 55%

Gross mortgage lending by building societies and other mutual lenders was £3.2 billion in April, up by 55 per cent compared to £2.1 billion in the same month last year. 

Mutuals took a 26 per cent market share of gross lending in April, up from 21 per cent in April 2012. In the year to April, gross lending by mutuals was £11.0 billion, up 28 per cent on the same period in 2012.

Net new mortgage lending (gross lending minus repayments) by mutuals was £0.9 billion in April, up from £0.2 billion in the same month last year. In the first four months of the year mortgage balances at mutuals have increased by £2.8 billion while balances at other lenders have fallen by £3.1 billion.

Building societies and other mutual lenders approved a total of 30,651 mortgages in April, up 30 per cent compared to the 23,617 in the same month last year.

Commenting, Adrian Coles, Director-General of the Building Societies Association, said:

“Gross lending by building societies and other mutuals was up markedly in April - by 55 per cent compared to the same month last year and by 28 per cent in the first four months of the year. One reason for the substantial rise this month particularly is that 31 March 2012 marked the end of the stamp duty holiday for first time buyers.  This generated a lull in activity in April 2012.  Following last year’s trend, mutual lenders are still delivering the majority of additional lending into the market as other providers have continued to de-leverage their balance sheets.

Despite the downward pressure on savings rates from the Funding for Lending scheme, building societies and other mutuals experienced strong inflows into savings accounts in April, building on a strong March performance.  This, coupled with some recent retail sales data seems to indicate that many consumers are currently choosing saving over spending. Given the mixed bag of factors affecting the savings market, including interest rates, consumer prices and wages it is unclear if the strong savings inflows will continue for the duration of the year.”

Increase in UK mortgage lending

The Council of Mortgage Lenders estimates that total gross mortgage lending increased by 4% on March to £12.1 billion in April, but cautions that meaningful comparisons with last April are difficult.

Commenting on market conditions in this month's Market Commentary, CML chief economist Bob Pannell observes:

"Our forward estimate is that gross lending in April was £12.1 billion. This would have been 4% up on March. The comparison with April last year – 21% higher – is flattered by the temporary dearth of house buying activity immediately following the closure of the stamp duty concession.

"The true underlying position is that April is likely to have been one of the strongest months for lending activity since late 2008, but not as strong as the year-earlier comparison suggests. Gross lending on a seasonally adjusted basis has been running comfortably above £12 billion for several months, but this is still barely half the average level of lending seen in 2003-4."

The Council of Mortgage Lenders' members are banks, building societies and other lenders who together undertake around 95% of all residential mortgage lending in the UK. There are 11.3 million mortgages in the UK, with loans worth over £1.2 trillion.