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Gross mortgage lending jumps 24%

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Homeowners will be buoyed by current research suggesting that gross mortgage lending reached an estimated £11.5 billion in March, up 24% from February, the Council of Mortgage Lenders (CML) has revealed.

As the spring season traditionally welcomes hungry buyers back into the market, the estimated hike in lending will have gone some way to alleviating fears brought about in a dire January, as loan advances slumped to their lowest level for 10 years.

But, while gross lending is rising, up 3% compared to last year, lending in the first quarter of 2010 reached £29.5 billion, down by almost 25% from late 2009.

“Overall, housing and mortgage activity remains subdued, but is comfortably higher than in the depths of the recession a year ago,” commented CML Economist Paul Samter. “Despite the increase in activity late last year and a subsequent fall early this year the underlying position looks to have barely changed. But, with the gradually improving economic backdrop and interest rates still low, we continue to expect a gentle improvement in market conditions later in the year.”

Lending dived by 49% during January, as the market took a hit from the end of the government’s stamp duty holiday, with purchases rushed through in December before the threshold fell back to £125,000 from £175,000.

Activity has since bounced back, with recent house price figures confirming improvements, and the Budget’s boost to first time buyers will place a more positive outlook on figures for the year ahead, the CML predicts.

Market rescue schemes, such as the Special Liquidity Scheme, which were designed to encourage lending, and which has so far loaned more than £180 billion to the banks, will begin to close next year and Mr Samter believes the same problems that have blighted the market in recent history will continue to stunt growth.

“The longer-term problems facing the market remain and will limit the speed of recovery in the housing market and wider economy,” he added. “Financial institutions still face the prospect of around £300 billion of official support schemes beginning to end from next year, and will need to find alternative funding sources. This will likely limit how much new funding can be made available to the housing market.”

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Written by Andrew Hodges

April 23, 2010 at 4:21 pm

Posted in Comment, LinkedIn

Tagged with ,

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