The Council of Mortgage Lenders’ April estimate for total gross lending is £16bn, down 1 per cent on the previous month and 4 per cent lower than the £16.7bn of lending last April.
The industry body noted that lending appears to be in the throes of an incipient recovery, with a favourable economic backdrop and an end to electoral uncertainty helping to underpin a gentle housing market upturn.
Coming months are likely to see additional fiscal restraint, ongoing monetary policies that support economic growth and a plethora of new housing initiatives, according to the CML, with house purchase demand expected to pick up modestly over the coming months.
Mohammad Jamei, a CML economist, commented that although lending in April was fractionally down on the previous month and year, this followed a stronger March.
“Overall, we now seem to be on the cusp of a modest lending recovery,” he explained, adding that household finances are generally improving as earnings growth continues to outstrip inflation, and mortgages are being offered at extremely competitive rates.
“As a result, we expect to see stronger lending in future months.”
Henry Woodcock, principal mortgage consultant at Iress, responded that an unpredictable election put the brakes on market activity in April, undoing much of the progress in lending volumes seen in March.
“Nevertheless, we do not see this slow down becoming a long term trend. The signs continue to point towards a market that is set to grow during the rest of the year, underpinned by a strengthening remortgage market and the diminishing likelihood of interest rates rising.”
He added that with the mortgage price war intensifying and long-term fixed rates reaching record lows, borrowers are reaping the benefit, sustaining demand.
“Equally, we should see upwards pressure on activity as the effects of stamp duty reform trickle through this year.”
The CML expects next week’s Queen’s Speech to feature a Housing Bill, extending Right to Buy to housing association tenants and setting out measures to provide homes for sale or rent below market rates.
Loans to first-time buyers and movers were up strongly in March, at 23,000 and a little over 25,000 respectively, and although both were still lower than a year earlier, the gap was much smaller than in January and February.
Elsewhere, buy-to-let lending and cash transactions have been more resilient parts of the market for some time; a trend that looks set to continue for the time being.
Finally, the CML stated that recent housing approvals data was also consistent with a market that is set to improve gently. They have averaged more than 61,000 a month so far this year, and the Bank of England’s latest inflation report anticipated this climbing to 65,000 by the fourth quarter.
peter.walker@ft.com
