Mortgage lending in UK up 9% in June but activity still sluggish

Mortgage lending in the UK reached £22.1 billion in June, some 9% higher than the previous month and 3% higher than the figures for June 2016, the lat

Mortgage lending in the UK reached £22.1 billion in June, some 9% higher than the previous month and 3% higher than the figures for June 2016, the latest data shows.

Gross mortgage lending for the second quarter of 2017 was an estimated £60.3 billion, up 3% on the first quarter of the year and a 6% increase on the £57.1 billion lent in the second quarter of 2016.

‘A period of belt tightening now seems to be underway as inflation begins to erode consumer spending power, and consumer confidence weakens. Given that the economy and housing market are closely linked, this has contributed to the activity plateau since the start of the year,’ said UK Finance Senior Economist Mohammad Jamei.

‘Looking ahead, housing market activity is likely to reflect economic conditions, a deterioration would likely dampen first time buyer numbers and home owners remortgaging, the factors that have supported lending recently,’ he added.

According to Alastair McKee, managing director of the UK-wide independent mortgage broker One 77 Mortgages, a similar pattern is expected for the second half of 2017. ‘Alongside higher living costs, more and more home owners and buyers are also concerned rates could go up this year, incentivising them to lock in to a lower fixed rate product,’ he said.

‘A remortgage may cost a little in the short term but it can save people many thousands in the long term. If inflation starts to rise again and rates go up, fixed mortgage payments could be a huge help for households further down the line. Unless the economy hits a wall or inflation rises really sharply, we would expect the second half of the year to mirror the first,’ he added.

Richard Sexton, director at e.surv chartered surveyors also pointed to a buoyant remortgage and first time buyer market. ‘This is largely due to record low mortgage rates on offer as well as the increased support of government and lender schemes helping to get more buyers onto the ladder,’ he said.

But he is concerned about not enough movement in the middle market. ‘This is causing a bottleneck of housing supply and in turn, is pushing up prices to historical highs. Confidence in the market and more favourable economic conditions should bring more fluidity to the market. As more existing home owners climb the property ladder, they will eventually free up affordable property for those looking to get onto the first rung,’ he explained.

Indeed, the issue of long term affordability persists, according to Jeremy Duncombe, director of the Legal & General Mortgage Club. ‘With average house prices now six times higher than the average salary, and up to 11 times more in London, many want to be home owners are unable to get on the housing ladder,’ he said.

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