According to the latest CML report, gross mortgage lending hit 19.9bn in December, 3% lower than November’s 20.5bn, but 23% higher than December 2014 (16.2bn).
This brings the estimated total for the year to 220.3 billion, an 8% increase on 2014s 203.3 billion and the highest annual gross lending figure since 2008.
Gross mortgage lending for the fourth quarter of 2015 was therefore an estimated 62.3 billion. This is a 1%increase on the third quarter and a 23% increase on the fourth quarter of 2014.
Richard Sexton , director of e.surv chartered surveyors, comments: House purchase lending has been rejuvenated over the past year and with the second half of 2015 looking stronger than the first in lending terms,the trend looks positive. Small-deposit lending has been transformed by a renewed enthusiasm to help first-time buyers cross the threshold of home ownership, as evidenced by the number of higher LTV products available.
Supply issues have become more of a factor in some areas as we head towards the turn of the year, as both growing demand and house prices finally get the attention they deserve from the government, but limited choice of affordable homes is certainly proving a challenge to some buyers. Alongside this obstacle, higher stamp duty changes are finally making their mark upon the top end of the market.
Undoubtedly, 2016 looks set to bring challenges and opportunities for lenders, with the Mortgage Credit Directive and a potential interest rate change on their radar.
John Phillips , group operations director of Spicerhaart and Just Mortgages says: In July last year, the CML revised its forecast of gross mortgage lending in 2015 to 209 billion from 222 billion. However, the latest figures show the total for 2015 was in fact 220.3 billion, the highest figure since 2008.
The total lending figure is significantly higher than the CMLs previous estimation. Despite a slow start to the year,the amount of money lent out to UK home buyers staged an unexpected resurgence, as concerns over political uncertainly faded away following the general election in May.
It is promising to see that gross mortgage lending increased by eight per cent last year and the underlying picture is one of modest recovery. The level of demand is likely to be a result of low inflation, strong wage growth and competitive mortgage deals, but there is still an element of uncertainty as demand continues to outstrip supply.
Richard Pike , Phoebus Software sales and marketing director, had this to say: The estimate for lending in December this morning has given us a total for 2015 in line with the CMLs original estimate for the year, which goes to show the higher level of activity in the second half was beyond most expectations. There was of course the increased activity around the time the governor of the Bank of England warned of early interest rates, which manifested itself in Octobers peak, but every month showed an increase on 2014.
The interest will be in what happens next; the world economy is shaky to say the least and with UK inflation remaining low, we are more than likely looking at a longer period of low interest rates then was intimated last year. This may be good for the housing market with more people taking advantage, especially as they come to the end of higher fixed rates. We all know that supply is a problem for many, but we could see a healthier remortgage market and of course a surge in buy-to-let in the first quarter before new rules kick in.
Brian Murphy , Head of Lending at Mortgage Advice Bureau (MAB), comments: There was a rush of buyers hitting the property market as 2015 came to a close, with RICS data showing a three-month high in demand in December. Looming stamp duty changes will be at the forefront of many buyers minds looking to purchase a buy-to-let investment or second home. This sprint to beat the 3% tax hike is likely to continue to cause heightened demand in the coming months.
As well as new entrants to the market, activity has also been stoked by homeowners cashing in on the rising value of their home to climb to the next rung of the property ladder. According to HMRC, housing transactions reached a near two-year high in December, with this level of activity in a single month not seen since February 2014. Lenders have also shown further confidence in the market, with an annual rise in gross lending of over 8%to help satisfy the appetites of hungry borrowers.
However, this growth is being built on shaky foundations. With scarce new homes being brought into the market,housing transactions are largely dependent on homeowners moving and selling their homes. Property turnover has slowed significantly in recent years, and this is an unsustainable path for a housing market which urgently needs an increase in the construction of new homes.
Peter Rollings , CEO of Marsh & Parsons, comments: By the end of 2015, housing market activity was singing from a completely different hymn sheet than it was at the beginning of the year. After a cautious start, there was a clear key change in sales levels after the conclusion of the general election, and the year closed on a high note and defied the usual seasonal slowdown with December experiencing the largest volume of property sales of any month in 2015, as buyers rushed to complete transactions before Christmas.
This steady build-up of activity and buyer confidence is even more impressive when you consider some of the adverse changes the housing market has had to stomach over the past twelve months. While the shakeup of stamp duty was indeed a welcome tonic for many first-time buyers and those purchasing property at the lower bands, it has been harder to digest at the middle and top-end, where the increased levy is particularly onerous.With an additional 3% of stamp duty coming into effect for second homeowners in April, 2016 may well see an opposite trend and a growth spurt in the early stages of this year that could then taper off in the short-term while the market retunes.
CML economist Mohammad Jamei observes: “Lending ended the year stronger than it started, with our estimate of nearly 20 billion lent in December. This brings total lending to just over 220 billion for 2015 as a whole, and slightly higher than we had anticipated. The low inflation environment, along with real wage growth, an improving labour market and competitive mortgage deals have all helped to underpin demand.
Having said this, the upside potential looks limited over the near-term, as the supply of existing and new properties on the market remains weak, and affordability pressures weigh on activity. There is an added element of uncertainty as we wait to see the impact of tax changes on the buy-to-let sector.”
Henry Woodcock , Principal Mortgage Consultant, IRESS, commented: “2015 certainly finished on a high for mortgage lending, with December’s figures rising for the fourth month in a row. Buyers continued to rush to complete ahead of Christmas, and an acceleration in buy-to-let mortgage lending ahead of the stamp duty hike this year kept the market alive and kicking for the end of the year.
We expect 2016 to continue in the same light initially, although regulatory change may take its toll eventually.Demand will be bolstered by fast movement in the buy-to-let market ahead of April’s deadline and with a rise in interest rates near enough ruled out for 2016, affordable finance will remain in place for borrowers and prospective buyers.”
Jeremy Duncombe , Director, Legal & General Mortgage Club, added: 2015 has been an exceedingly strong year for mortgage lending, and we expect favourable UK economic conditions to further drive demand in 2016.That said, the number of transactions has remained relatively flat throughout the year as a result of the lack of available housing stock for buyers. This is contrary to the increases we are seeing in lending, showing that this strong performance is being driven in part by escalating house prices as people are having to take out larger loans to secure a property.”
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