January lending figures fell into the unsurprising seasonal pattern of a decrease from the previous month but a welcomed rise in comparison to the previous year.
And it’s this year-on-year growth that should work to stave off any real overlying negativity that could be attached to this drop in lending.
Figures from the Council of Mortgage Lenders reported that gross mortgage lending declined to an estimated £10.5bn in January.
Lending fell by 14% from £12.2bn in December but was 10% higher than the total of £9.5bn in January 2011.
The CML also added that although a seasonal decline was expected, January was the sixth month in a row of higher year-on-year lending.
Of course, as we will evaluate further later, these figures may be boosted by first-time buyers seeking to complete deals before the stamp duty concession ends in March but market indicators remain positive.
Economic conditions will continue to have an overriding effect on both the housing and mortgage market but thanks to a relatively robust foundation I believe we can carry on looking forward with a good degree of optimism.
Longer term products
The beginning of 2012 appears, on the surface at least, to represent the emergence of some longer term mortgage products to the marketplace.
In recent weeks we have seen the Post Office cut the rate on its 75% loan to value 5-year fixed rate deal and Norwich & Peterborough release and then pull its 10-year fixed rate deal.
Of course here at Barclays we have recently re-introduced a 10-year fixed rate product and also launched the Future Fix mortgage which allows borrowers to have a tracker rate for the first two years and then switch to a fixed rate for the remaining three years of the deal.
These help illustrate innovation, giving borrowers more options and flexibility.
Focusing on the 10-year market it was interesting to read an article penned by Defaqto insight analyst for banking David Black which said: “Four years ago, borrowers looking for a 10-year fixed-rate mortgage had 124 to choose from.
“However, a rapid decline saw the number reduce dramatically down to only one in March 2011. Numbers have since picked up but there are currently only 10 available.”
It’s obvious that this is an area taking small steps but it’s fair to say that increasing numbers of borrowers are thinking longer term about their financial planning requirements as they seek to establish some security for regular outgoings.
So it’s little wonder that we are seeing signs of a re-emergence of longer term products. Of course a 10-year mortgage will not be applicable for everyone but it can be a viable option for some elements of society.
Importantly such deals could also signify the beginning of income generating possibilities for holistic advisers; rather than the end as some short-sighted intermediaries might once have believed.
First-time buyers
First-time buyers remain one of the cornerstones of the mortgage market and as such lenders continue to work hard in juggling affordability, funding and risk to try and propel this sector forward.
And there is evidence that the market is heading in the right direction. Recent figures from the Council of Mortgage Lenders revealed that mortgages advanced to first-time buyers rose 7% by volume and 10% by value to 18,700 and £2.3bn respectively in December 2011.
There was also said to be an increase in the proportion of properties bought by first-time buyers within the price band currently exempt from stamp duty, up from 50% to 53%.
The Royal Institute of Chartered Surveyors also agrees that house sales edged up slightly during January as an increased number of first-time buyers looked to beat the stamp duty holiday.
It said that some 12% more surveyors across the UK reported rises rather than falls in newly agreed sales since the beginning of the year.
These are encouraging signs but we have to be realistic and expect some levelling out when the stamp duty exemption ends in March.
As such there is no fear that lenders will get too carried away. Expectations over the rest of 2012 remain realistic as various economic conditions continue to influence lending levels.
That’s not to say that the first-time buyer market will not remain a prominent one for lenders but there is little doubt that it continues to prove a challenging environment and certainly not one which will be transformed overnight.
Economy
As previously mentioned the economy continues to have a major influence over financial services and as such it’s become paramount that intermediaries keep a closer eye on the wider influences that directly affect the marketplace.
Recent news highlights some mixed messages. Final quarter figures from the Office for National Statistics show that UK unemployment rose by 48,000 to hit 2.67m.
In more encouraging news ONS data suggests that the UK consumer prices index has fallen to 3.6% in January. The consumer prices index is down 0.6% from 4.2% in December. The retail prices index fell to 3.9%, from 4.8% in December.
Meanwhile Moody’s has put the UK’s AAA credit rating on negative watch because of economic uncertainty.
The rating agency says uncertainty in the Eurozone, slippage in the timetable of the deficit reduction programme and the inability of the UK economy to absorb further shock have all contributed to the potential downgrading.
In additional news the Bank of England’s Monetary Policy Committee voted for more quantitative easing at its February meeting.
The committee increased the size of its asset purchase programme by £50bn, taking it to a total of £325bn. The MPC last increased its QE programme in October 2011, by £75bn to £275bn.
So whilst we have a mix of positives and negatives there are no great surprises which must also be seen as somewhat positive news.
Consumer confidence is key to helping boost the mortgage market.
So let’s hope that economic conditions don’t create too many barriers to growth that is currently being experienced in the housing market and that as an industry we continue to make steady progress in the right direction.
