Mortgages  

Gross lending to hit £225bn in 2015: L&G

Gross lending to hit £225bn in 2015: L&G

Legal and General Mortgage Club has predicted gross mortgage lending to reach approximately £225bn this year, along with new entrants entering the market and a continued low interest rate environment.

Jeremy Duncombe, the club’s director, stated that while this figure may seem ambitious as lending in 2014 reached around £205.6bn there are good reasons to think this is a realistic target.

He said: “House prices are rising by about 8 per cent a year, so if the same number of mortgages are written in 2015 as last year, this should see an increase in lending volumes.

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“As well as house price growth other factors such as new entrants to the lending market, a low interest rate environment which is likely to continue for the rest of the year and the changes to stamp duty rules should all act as a strong tail wind for lenders and the industry as a whole.”

At the end of last year, a handful of mortgage experts told FTAdviser that gross mortgage lending is set to increase by around 10 per cent in 2015, experts have predicted.

This year gross mortgage lending is predicted to be around £200-£225bn, the experts previously said, following on from last year’s £205bn, compared to £176bn in 2013, £145.3bn in 2012 and £141.3bn in 2011.

Another year of low rates from the Bank of England may stop lenders from increasing their rates, but swap rates - from which fixed rates are set - are notoriously volatile, so low base rates do not necessarily mean low fixed rates, Mr Duncombe said.

He said: “There are some excellent fixed rates around at the moment, so both those looking to buy a house and those coming to the end of an existing deal should speak to a mortgage broker who can advise them on the best deal for their circumstances, as the likelihood is that a rate rise has been delayed and not deferred indefinitely.”

Mr Duncombe noted that more lenders are likely to increase procuration fees, to keep up with their peers, which is obviously good news for brokers, recognising their increasing importance, cost effectiveness and the quality of the intermediary channel.

“Brokers should use the increase in fees to invest in the future of their businesses by seeking to expand, improve their processes and technology and focus on re-mortgage opportunities,” commented Mr Duncombe, adding that if the market is to reach £225bn then brokers will need to drive a lot of that volume.

Finally, reform of stamp duty announced in the Autumn Statement will encourage more fluidity in the housing market, according to Mr Duncombe, reducing the amount of tax that people buying an average priced home will need to pay and making it more affordable for many first time buyers to purchase a property.

“In theory this should allow many potential buyers to jump on the ladder sooner than they had expected and may well act as a stimulus to demand,” Mr Duncombe concluded.