Gross new lending hits record high as Help to Buy kicks in

Figures published today by the Bank of England (BoE) and Financial Conduct Authority (FCA) show new high for gross new lending and interest rates on gross new lending for the second quarter, since the start of the series in 2007.

Mortgage lenders and administrator statistics show record levels; at 1.6 percentage points higher than the last quarter, house purchase lending worked out as 65.0 per cent of new advances.

The value of residential loans advanced to first time buyers increased by £1.9 billion over the past year to £8.0 billion, an increase of 31%.

There was a large increase in the value of new lending for buy to let (BTL) over the past year – up from £3.9 billion advanced in Q2 2012 to £5.0 billion in Q2 2013.

Whilst Help to Buy, the government-backed scheme to help working individuals to buy a home, has begun for new builds, the second part of the scheme has not yet kicked in.

Demand is, at present, inflated by the BoE's Funding for Lending Scheme, launched in July 2012. The policy is designed to allow banks and building societies to borrow from the Bank below market rates.

Both measures are helping only to fuel demand; little is currently being done to ease the planning regulations that constrain supply.

The Bank of England says of arrears improvement:

The number of new arrears cases in Q2 2013 was 12% lower than in Q1 2013 at 32,500. The total number of loan accounts with reportable arrears also decreased to 292,200 in Q2 2013.

The performance of loans in arrears – payments received as a percentage of payments due – improved for the fourth quarter in succession to 60.5% in Q2 2013.

Arrears totalling £27 million on 7,556 accounts were capitalised in Q2 2013 - a decrease of 1.5% by amounts of arrears compared with Q2 2012 and a reduction of 4.0% by number in the same period.