September 24th, 2013
The latest statistics from the Council of Mortgage Lenders suggests that gross lending did not rise further over the month of August, and in fact decreased marginally. In July, figures were estimated to be as high as £16.7bn, but these dropped to £16.6bn in August.
However, this time of year is often considered a point when many choose to take time off to holiday, so the consistency continues to provide promise that the upward trend in market activity is likely to continue; compared to August 2012, the figures are a significant rise, as £13bn was lent during the same period
Amid fears of a rapidly expanding housing bubble, many industry experts have been quick to cast their opinions on the matter, whether in support or direct rejection of the claim that prices are out of control. The chief economist of the CML, Bob Parnell, was keen to add his own views after the release of the body’s data. Parnell clearly feels that it may be too hasty to raise fears that an in-flux of activity is a negative factor, and made it clear that he saw the rise in activity of little concern compared to the market recovery in the early 1990’s.
Parnell also said: ‘We are beginning to experience a healthy and broad-based recovery in mortgage lending activity. We attribute much of this turnaround to the improvement in funding markets generally, and also to the Funding for Lending Scheme. The Bank of England’s approvals data suggests that the positive tone for house purchase and remortgage lending will continue.’
Such widespread positivity has reinvigorated the possibility of borrowers tapping into equity within their homes, with a marked rise in the amount of unsecured and secured additional borrowing activity being reported. Since 2009, many borrowers have been reticent to utilise unsecured options such as credit cards, but this year is the first time that the figures have risen in this area. The British Bankers Association report that credit card debt had risen to £76m in August, potentially evidence that many borrowers are using credit to fund vacations.
In tandem with these figures, remortgage approvals for refinancing of current debt rose to 22,665 in August, a recent high since similar figures were recorded in 2011. The British Bankers Association director of statistics, David Dooks, acknowledged that the numbers suggest consumers are beginning to show signs that their faith in the market is returning: ‘These figures suggest that consumer confidence is growing, For the first time in four years annual growth in household borrowing on credit cards and personal loans has turned positive and mortgages approved for house purchase are also at their highest level since 2009.’
While the Funding for Lending scheme has certainly improved personal borrowing activity, the other target for the scheme to influence business lending has been less successful. It has been reported that this area of lending has actually decreased in recent times, although it should be noted that lending to smaller businesses has continued. Some see these points as a signal that the bottom of the recession has been hit, and a gradual return to activity levels pre-credit crunch are due to begin again.
The chief UK economist at HIS Global Insight, Howard Archer, stated that the appetite for unsecured debt is still way below the levels seen before the credit crisis hit. He said: ‘The overall impression is that the consumer appetite for taking on new borrowing is still relatively limited while many consumers remain keen to reduce their debt.’
Article By: Simon Butler, Senior Mortgage Consultant at Contractor Mortgages Made Easy
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