Signs of life in housing market, say lenders

THE mortgage market is beginning to show “signs of life”, lenders have claimed, as the number of remortgages taken out in August rocketed by almost a third and lending to both first-time buyers and home movers hit its highest level for more than a year.

Both the volume and value of loans were 30 per cent higher than in the same period last year, according to new data from the Council of Mortgage Lenders (CML).

House purchase lending also rose in August. There were 52,000 loans – worth £7.9 billion – advanced in the period, up from 48,700 in July and from 51,000 in August last year.

A total of 34,100 remortgage loans were taken out in the month, worth £4.2 bn. But the increase came as the CML said home movers put 9.4 per cent of their income towards mortgage interest payments – the lowest level since monthly records began in 2002.

It said the trend reflected further declines in the interest rates currently available to borrowers with larger deposits – usually people who already own homes and have built up equity and are moving up the property ladder.

Data from price comparison website MoneySupermarket last week showed that fixed two-year mortgage deals had reached a record low.

“Even though it is impossible to ignore the knocks to confidence emanating from the euro- zone, August lending showed welcome signs of life,” said Paul Smee, director general of the CML.

“With those moving house experiencing a record low in the proportion of their income needed to pay their mortgage interest, it is clear that the low rate environment is a benefit to those with mortgages, even against the backdrop of the gloom in the wider economy.”

The number of loans to first-time buyers rose 5 per cent both from last month and August last year. Those getting onto the property ladder for the first time continued to put down an average of 20 per cent of their property’s value as a deposit and borrowed 3.20 times their income – slightly up from 3.17 times in July – while typical deposits for home movers stayed at 31 per cent for a second month.

Mark Dyason, of Edinburgh Mortgage Advice, said the figures were good news – citing more realistic sellers and low-cost mortgages as drivers for the flagging housing market. “The Mexican standoff between Scotland’s buyers and sellers has finally come to an end,” he said. “The mortgage market is beginning to pick up momentum.

“Despite the storm clouds over the economy, some of the mortgage products out there right now are so competitive that people are finally making their move. Another key driver of the property and mortgage markets in Scotland right now is the fact sellers have become far more realistic.”

He added: “Nobody would say that we’re out of the woods yet but these latest mortgage figures are certainly a step in the right direction.”

However, Howard Archer, chief UK economist for IHS Global Insight, was less upbeat.

“Admittedly, the Council of Mortgage Lenders data reported that mortgage advances improved in August,” he said. “But they were still muted compared to long-term norms and do not suggest a significant step up in housing market activity.”