Mortgage loans jump back after September dip

Julian Harris
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MORTGAGE lending bounced back strongly in October, according to industry figures released yesterday, yet analysts remain unconvinced that the government’s Funding for Lending Scheme (FLS) is delivering a sea change in the housing market.

The total number of loans for house purchase climbed 13.8 per cent to 49,500, data from the Council of Mortgage Lenders (CML) revealed.

After a disappointingly flat September, the figures provided some cause for optimism, with the number of loans made to first time buyers jumping by 14.3 per cent to 20,000.

Yet the CML was careful not to get carried away. “An uptick in remortgage lending may be an early sign of a small positive impact of the Funding for Lending scheme, but it’s still too soon to evaluate the effects of the scheme,” said its head, Paul Smee.

Loans for remortgaging were up 11.6 per cent on the month; the number of remortgage loans can be a better barometer of the FLS’s effect than loans for purchase, due to the lag from the length of time it takes to buy a house.

The government and the Bank of England launched the FLS, which provides funding to participating banks with the intention of boosting loans to individuals and companies.

Yet David Newnes, director of estate agent owner LSL Property Services, remains unconvinced.

“The impact of FLS is being felt on mortgage rates, but in reality, the extent to which it can provide a sustained boost to first-time buyer numbers in the coming year is likely to be counterbalanced by the capital buffers banks must set in place for higher risk lending to new buyers,” Newnes said.

Yet October’s pick up in the availability of mortgages to young people looking to get onto the property ladder will be welcomed, he added. “Any sign of improvement will be welcomed with open arms by the legion of frustrated first-time buyers swelling the ranks of renters at present.”

The number of loans to first time buyers was up 19 per cent compared to the same time last year. The £2.5bn in mortgages included an average loan-to-value ratio of 80 per cent, with the data revealing that first time buyers spend an average of 13.5 per cent of their income on mortgage interest payments, the data showed.