Poll
Industry reacts to return in pre-crisis lending
Loan Talk has been told that the increased amount of mortgage lending is good for the sector, especially if it’s “good quality lending”.
It comes after the Council of Mortgage Lenders (CML) estimated that gross mortgage lending in April reached £18.5bn, which was the highest lending total for the month of April since 2008.
“The underlying picture still shows signs of growth, as the market remains underpinned by strong fundamentals such as increasing wages and rising employment,” Mohammad Jamei, Economist at the CML, stated.
“But it is possible that the uncertainty around the upcoming EU referendum in June will weigh on activity in the upcoming months.”
However, the UK’s largest building society Nationwide revealed that it had lent more money to people looking to purchase a home in the past year than at any time since before the financial crisis in 2007.
Other first and second charge mortgage lenders have produced strong lending results in the past year with Paragon Bank seeing a 584% growth in second charge mortgage advances.
Tony Marshall, Managing Director at Equifinance, said it was good to see lending increasing and that the market had returned to a sustained level of normality.
“Our lending has increased significantly in 2016 as we are able to help give more clients financial access to second charge products.
“I believe service is key to this growth.
“It's vital to underwrite each case individually and support brokers and their clients during the application process to fully understand all aspects of the clients' requirements and to help them achieve their financial goals.”
This has been highlighted by HSBC, who recently revealed a 0.99% mortgage product fixed for two years, which Rachel Springall, Finance Expert at Moneyfacts.co.uk, said was the lowest fixed rate since its records began.
Meanwhile, the Mortgage Advice Bureau revealed that the number of products available was at its highest level since March 2008.
“Lenders are keen to introduce new products to meet consumer needs, and to grab market share where possible,” Brian Murphy, Head of Lending at Mortgage Advice Bureau, stated.
“This increasing appetite from lenders in the form of wider product choice and ever more competitive products has fuelled borrowers’ appetites, which is borne out by the increased levels of activity we’re seeing.”
However, as Mohammad stated, factors such as the EU referendum and the comedown from the buy-to-let stamp duty rush will have an effect on mortgage lending figures.
“As we move past the stamp duty change that came into effect at the start of April, we expect to see a quieter second quarter as some transactions that were due to take place were brought forward to the first quarter of this year,” Mohammad added.
“This is likely to mean that over the next few months buy-to-let takes a back seat as lending is driven by first-time buyers, movers and remortgage customers.”
When looking at how the second charge market was fairing compared to the mainstream mortgage market, the Finance & Leasing Association (FLA) reported a 28% fall in the volume of new second charge mortgage finance as the market adjusted following the implementation of the Mortgage Credit Directive.
“Although new lending in the second charge mortgage market rose 34% by value in 2015 to £844m – the highest annual level of new business reported since 2008 – this is still significantly below pre-crisis levels when it peaked at more than £5bn by value,” Fiona Hoyle, Head of Consumer and Mortgage Finance at the FLA, said.
“It’s also important to remember that both first and second charge mortgages are now regulated under the same rigorous regime by the Financial Conduct Authority.
“According to our latest figures, second charge mortgage new business fell by 19% in April as lenders bedded in the new systems required by the market’s transfer to the FCA’s mortgage regime in March.”
However, Tony concluded: “Increased lending is good for the sector as it provides clients with financial products that can help improve their credit profile and financial position for the future - so more, good quality lending is good for the market.
“Long may it continue."
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