Mortgage lending jumps

Mortgage lending was 21 per cent higher in March than in February, according to new data from the Council of Mortgage Lenders (CML) – but total advances were still 2 per cent lower than a year previously and unlikely to lead to any uplift in house prices, according to brokers

Gross lending hit £11.3bn last month, up from £9.3bn a month previously, lifting the total value of mortgages granted in the first quarter of 2011 to an estimated £30.1bn, which was 1 per cent more than the £29.7bn-worth of lending in the first three months of 2010.

“The housing market has emerged hesitantly from hibernation,” said CML chief economist Bob Pannell. “Lenders expect mortgage credit availability to improve this quarter, and this should help to underpin house purchase activity albeit at pretty low levels. Remortgage demand, meanwhile, continues to firm, presumably linked to expectations of higher base rates.”

In February, remortgage approvals were the highest for more than two years, and the CML expects stronger remortgage activity to support overall lending activity.

Brian Murphy, head of lending at Mortgage Advice Bureau, the mortgage broker, said: “The latest gross mortgage lending figures are surprisingly positive and reflect what we’re seeing in the market, with remortgage activity particularly buoyant at the moment as homeowners continue to take advantage of the favourable interest rate environment.”

At the same time, a new report from Countrywide has found that more properties came onto the market in March, for a third consecutive month. Figures from the estate agent’s 1,300 branches show that the number of homes for sale increased by 4 per cent last month, increasing the number of new properties available in the first quarter by 37 per cent, compared with the last quarter of 2010.

However, not all are selling. Overall, the number of sales agreed across the UK dipped by 0.8 percent in March – in spite of an influx of buyers seeking to complete purchases of more than £1m before the increase in stamp duty on April 6.

Housing market activity is therefore expected to remain subdued, as the long-term trend in new mortgage lending remains down. CML figures show gross lending in the first quarter of 2011 was 11 per cent less than the £33.9bn borrowed in the fourth quarter of 2010.

“Mortgage lending may be up in March but it’s still down in historical terms,” pointed out Jonathan Samuels, chief executive of Dragonfly Property Finance. “We certainly don’t see this as the beginning of a trend given current conditions. For the rest of the year and on into 2012 the mainstream mortgage market – and house prices generally – will continue to flatline.”

He forecast that it could be two to three years before the mainstream mortgage market gets back to levels of activity seen before the financial crisis.

Murphy of Mortgage Advice Bureau agreed. “It’s important not to get too far ahead of ourselves,” he said. “The level of mortgage activity in March is still down on 12 months ago, and it’s far too soon to talk optimistically about a housing market recovery when buyers are still suffering from a serious lack of confidence.”

“It is also worth bearing in mind that although March has been a good month for mortgage activity, there is every chance that April, despite the glorious weather, could be a total washout, with Royal Wedding fever sweeping the country and people taking advantage of two bank holiday weekends to go away.

“How the market bounces back in May, following a predicted April lull, could very much determine how the mortgage market performs for the rest of the year.”

Barclays cuts mortgage rates

Barclays has cut the rates on some of its fixed and tracker-rate mortgages by up to 0.32 percentage points, in a bid to attract borrowers worried about future rises in the Bank of England base rate. From Thursday April 21, its two-year fixed rate for borrowers seeking up to 75 per cent of a property’s value will fall from 3.89 per cent to 3.57 per cent. Reductions are also being made to the bank’s ‘Great Escape’ remortgage package, which will offer a two-year fixed rate of 3.79 per cent, rather than 3.99 per cent previously. This remortgage deal has also been extended to those borrowers needing a 70 per cent loan-to-value, not just those seeking 60 per cent or less.