Gross mortgage lending leapt by 29% in June to its highest level in seven years, as uncertainties over the election disappeared. However, mortgage lenders say they do not expect the post-vote bounce to continue, and a survey of borrowers suggests confidence in the housing market is slipping.
The latest monthly data from the Council of Mortgage Lenders (CML) showed borrowers took out an estimated £20.5bn of new loans in June, compared with £15.9bn in May. Year-on-year lending was up by 15% from the £17.8bn advanced in June 2014.
The figure was the highest since July 2008, when the credit crunch was affecting the housing market.
The CML said the figure may have been “flattered” by an end to uncertainties around the general election. At the top end of the market, buyers had feared a mansion tax on homes costing more than £2m, while first-time buyers may have stalled in case a Labour pledge to cut stamp duty became a reality.
The June jump in lending brought gross lending for the second quarter to a total of £52.2bn, which was up 17% from the previous quarter’s £44.5bn, but only by 1% on the second quarter in 2014 when it came to £51.7bn.
The start to the year has been quieter than anticipated, and the CML has cut its forecasts for lending for 2015 and 2016 as rising house prices made it tougher for people to buy.
It said it expected gross lending of £209bn in 2015, down from an earlier forecast of £222bn; for 2016 it is predicting £230bn, down from £240bn.
CML economist Mohammad Jamei said: “Our lending figure for June may be flattered by the end of political uncertainties related to May’s general election, and the underlying picture is likely to be one of only modest recovery.
“This should be supported by favourable conditions in the economy, though it will be limited by rising house prices and affordability pressures.”
Andrew Montlake, director at Coreco Mortgage Brokers, said figures had been pushed up by the end of the drawn-out election process.
“With interest rates remaining low for the foreseeable future and a new wave of competition between lenders expected to rage over the second half of the year, I suspect that this upward trend will continue, albeit by perhaps more modest amounts,” he said.
“The main constraints are not consumer demand, but rather lenders’ underwriting criteria and affordability considerations which are still tight following the implementation of the mortgage market review.”
Research by Halifax suggests consumers’ expectations that house prices will continue to go up waned in June after reaching a post-election high.
Difficulties raising a deposit and already high house prices were in the top three barriers to homeownership cited by respondents, alongside job security.
