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‘Latest figures have shown that mortgage market lending has reached its highest monthly level since 2008. Consequently, the Council of Mortgage Lenders (CML) has predicted that total lending for the year is likely to reach £209bn which would represent a 3% increase on 2014.
The latest figures show that gross mortgage lending for the month was recorded at just over £17bn on an adjusted basis. Although a good percentage of this transactional growth may be linked to recovery in the buy to let sector, much of this activity was accounted for by home movers looking to remortgage while rates remain low. Similarly, approvals for house purchase have also risen to just over 70,000 in the last two months, indicating that lending continues to be fairly evenly spread between movers and first time buyers.
A combination of low interest rates, cheap mortgage finance and buy to let investors looking to beat the stamp duty hike have been the main cause of this surge in lending over the last quarter. Pent up buyer demand from the latter end of 2015 has also significantly contributed to keeping the market buoyant in the first part of the year.
A healthy mortgage market is a clear sign of economic recovery and points to the fact that we are starting to experience an improved labour market as well as positive wage growth versus inflation. Slow economic recovery such as this will help to ensure rates remain low and will encourage confidence from borrowers and provoke subsequent liquidity in the market.
However, in spite of an improving economic outlook, the second quarter of the year may see lending volumes fall slightly as a result of the buy to let stamp duty hike and increased regulatory pressure in the form of the EMCD (European Mortgage Credit Derivative) which is likely to inhibit activity in the market. The good news is that this dip is likely to be a modest one and the CML has further predicted that lending should continue to remain stable for the rest of the year. Furthermore, lenders are likely to be fully focussed on remaining competitive in the current market which is why we can still look forward to enjoying cheap mortgage finance for the foreseeable future with some fixed rate deals now available for as little as 1.07%.
However, while low rates mean demand from borrowers is likely to remain high over the next few months, issues with affordability are likely to prevent many people from gaining access to the best possible deal; particularly following the Mortgage Credit Derivative which will have a major impact on lenders. That is why there has never been a more relevant time to seek quality, independent advice on the best way to navigate through the likely obstacles; whether you are a homebuyer or looking to re-mortgage.’