Banks and building societies have reported their best month for mortgage lending since 2008, in a further sign that the UK housing market is recovering.
May’s strong acceleration has surpassed its expectations
The Council of Mortgage Lenders (CML) said that mortgage lending soared by one fifth (21 per cent) in May compared with April, with an estimated £14.7 billion (€17.2 million) worth of mortgages advanced in May.
This figure marks the highest monthly estimate for gross mortgage lending that the CML has seen since October 2008.
The CML has previously predicted that activity would pick up this year, boosted by Government efforts to unblock the housing market such as its Funding for Lending scheme.
But the lending body said that May’s strong acceleration has surpassed its expectations. It suggested the strong uplift could be in part down to the bad weather seen earlier this year creating “pent up” demand.
A pick-up in lenders’ risk appetite is resulting in a “discernible, if modest” improvement in the number of low-deposit mortgage deals that are being handed out, the CML said.
Chief economist Bob Pannell said: “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 (Royal Institution of Chartered Surveyors) 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.”
May’s mortgage lending estimate also represents a 17 per cent rise compared with the same month last year.
Lenders have been slashing mortgage rates and mortgage availability has increased since the Funding for Lending scheme, which gives lenders access to cheap finance to help borrowers, was launched last August.
Other Government schemes such as NewBuy and Help to Buy have been specifically launched to help people with smaller deposits.
A series of recent studies have reported signs of confidence returning to the market, including demand from would-be buyers strengthening and sellers becoming more confident about sticking to their asking prices.
RICS recently reported that it was seeing “green shoots” appearing in the housing market, with house sales at their strongest for over three years.
Earlier last week, property search website Rightmove said that house sellers’ average asking prices have broken through the quarter of a million pounds milestone for the first time.
Rightmove found evidence that housing market confidence is growing across the country.
However, concerns have been raised that the Government’s schemes must not cause a housing ‘bubble’, with mortgage borrowers trying to stretch their finances too far. Sellers’ asking prices have risen every month so far during 2013, according to Rightmove.