Mortgage Lending Reaches an 11-Month High

Mortgage lending is on the rise, offering positive signs for the housing market. The Council of Mortgage Lenders (CML) says that lending hit an 11-month high in October and there was a year-on-year increase of 4%.

It is thought that the rise in mortgage lending is partly due to the Government’s £80bn Funding for Lending, which was launched in August this year.

The scheme aims to increase lending to businesses and households in a bid to help the economy. Whatever the reason for the rise, it is welcome news for the housing market following the decline in lending that was reported in September. The pick-up appears to be happening in all areas of the market too.

Bob Parnell, the CML’s chief economist, says: “House purchases and remortgage activity have both picked up recently.” This shows that while lenders are approving more new home loans, an increasing number of existing homeowners are remortgaging their properties too.

Activity in the remortgaging market has been slow throughout 2012 because so many property owners were happy with the good deal they were getting so there was no incentive to look elsewhere. Now that several lenders have increased their standard variable mortgage rates, people are beginning to remortgage.

Of course, as well as looking for a better deal, many homeowners remortgage when they are upgrading to a larger home too. Families who have been staying put since the recession began, may have found they can no longer wait to upsize and are moving to larger flats and houses that can accommodate their needs. The CML says it expects the rise in lending to continue for both remortgages and new mortgage products. The body also says that the Funding for Lending scheme should lead to more competitive rates being made available to borrowers, which in itself will boost lending as home loans become more affordable to buyers.

So far, the best deals available through the scheme have been for those with larger deposits. However, the banks have started lending to purchasers with a 10% deposit, so opportunities to buy are becoming available to those with less equity too.