Mortgage lending on the increase

Grovelawn Financial News 24/06/2013

← New Scheme to help with deposits | News For June 2013 | New scheme is said to push house price rises to 11-year high →

Mortgage lending on the increase

Figures from the Council of Mortgage Lenders (CML) reveal that mortgage lending went up by nearly a quarter in May.

The CML say they felt the increased numbers show a trend of stronger home purchase activity, the strongest since October 2008 when mortgage lending was much higher. There is a feeling that the housing market is no longer spiralling downwards and that the worst could be over.

The total gross mortgage lending during May showed a rise of 21p%, to £14.7bn from £12.2 billion in April and 17p% higher than the total of £12.6 billion in May 2012.

There are two Government schemes, which is felt may be creating a false confidence in the market, one of which is ‘Funding for Lending’ that gives banks and other lenders cheap loans in return for them providing funds to borrowers for home loans. The other scheme is the ‘Help to Buy’ which promises lenders a guarantee of up to 20% of the price of the property. However, there is the concern that if a borrower defaults on the loan, the taxpayer will be liable for a proportion of the losses.

On another note the Building Societies Association (BSA) also warned that government policy could create a house price bubble. Paul Broadhead, head of mortgage policy at the BSA, said: "Care is needed to prevent the actions taken today inadvertently causing a distorted housing market in three years’ time – a market where state intervention has artificially hiked prices."

The most recent official data on house prices in April showed that the average cost of a home in the UK rose to £238,000. A 6% rise in London to an average of £414,000 and a 3.6pc rise in the East Midlands to an average of £171,000

← New Scheme to help with deposits | News For June 2013 | New scheme is said to push house price rises to 11-year high →

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