Big rise in mortgage business takes even the lenders by surprise

A big rise in mortgage lending for house purchase has taken lenders by surprise.

Gross mortgage lending shot up by an estimated 21% in May, the Council of Mortgage Lenders has estimated.

Its forecast is the highest monthly estimate since October 2008.

It calculates that total gross mortgage lending in May increased to £14.7bn, up from £12.2bn in April.

The figure is not only a 21% rise from April, but is 17% more than in May of last year.

CML chief economist Bob Pannell said the “modestly improving UK economy” appears to rest on a pick-up in consumer spending and a recovering housing market.
 
He added: “Funding conditions, helped by the Funding for Lending scheme, continue to look favourable and are supporting more competitive mortgage pricing and availability and a gradual resumption of lenders’ risk appetite.
 
“While the direction of travel is clear and fits well with the more positive housing surveys from RICS and others, our forward estimate does imply somewhat stronger house purchase activity than we had been expecting. 

“This may reflect a degree of pent-up sales following the extended spell of poor weather earlier this year.”

Not everyone was impressed by the news.

Duncan Kreeger, director of peer-to-peer lender West One Loans, said: “Comparisons with the closing months of 2008 are like admiring the paintwork on a sinking ship. High street lending last month was less than half the average level for 2007 – and still around 70% below the pre-crisis average.  

“It’s true that, on the back of huge artificial support, May was a relatively positive month for mainstream lenders. But the long-term trend away from the old world of 20th-century finance will outlast many lenders and their addiction to life-support”

However, estate agent Paul Smith, chief executive of Spicerhaart, said: “At last lenders are doing what they should be doing, which is lending.

“Our branches are currently achieving 97.8% of asking prices for properties, indicating that it is a good time to sell. 

“Demand is high because, at last, lenders have been able to offer very competitive rates and a higher percentage of property value loans. Confidence is also back.
 
“However, there are 13% fewer properties coming on to the market than last year, so supply is short.

“The market needs prospective buyers to also put their own properties on the market rather than wait until having their own offer to purchase accepted. This will provide much-needed fluidity and more choice of stock at all levels.”