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Gross mortgage lending is up and down by 19% in March

Gross mortgage lending went up 19% between February and March, rising to £21.4bn, according to the latest estimates from the Council of Mortgage Lenders (CML).

In February 2017, the lending total was £17.9bn, but March’s figure was 19% lower than the £26.3bn lent in March last year.

The sharp fall in year-on-year lending was expected, as March last year saw significant rises in activity as borrowers rushed to beat the second property stamp duty deadline that came into effect from the beginning of April.

Gross mortgage lending for the first quarter of 2017 was therefore an estimated £59.1bn. This is a 4% decrease on the fourth quarter of last year and a 6% decrease on the £63bn loaned in the first quarter of 2016.

“Mortgage lending appears to be in neutral gear,” said Mohammad Jamei, the CML’s senior economist. “Our gross estimate for March is £21.4 billion and this is broadly in line with average monthly lending over the past year. Within this aggregate level, there has been a shift towards first-time buyer and remortgage customers, away from home movers and buy-to-let landlords.

“We expect this profile to continue over the short-term, as low mortgage rates encourage existing borrowers to remortgage and government schemes help first-time buyers. We do not expect any marked effect from the General Election.”

In industry reaction, Henry Woodcock, principal mortgage consultant at IRESS, said: “There was a concern that the drop in gross lending in February would continue into March, especially given a matching decline in approvals last month. But borrowers continued to see the opportunity to significantly save money on their mortgage deals in the current low interest rate environment which, combined with the modest average increase in house prices, has encouraged both house buyers and remortgagers alike to secure a new mortgage.

Going into April, the outlook for gross lending doesn’t look rosy. In addition to the snap general election announcement, which may result in people delaying significant financial commitments in the short term, there are also a few other factors at play that might dampen mortgage activity. Although unemployment remains low at under 5%, inflation is starting to eat into wage growth and is above the Government’s 2% inflation target. The recent Royal Institution of Chartered Surveyors (RICS) monthly survey shows that stock levels are at a new record low and the number of people interested in buying a property – and the number of sales – were also ‘stagnant’ in March. With the prospect of a rise in the Bank of England base rate, consumers may decide to delay buying that new home or changing mortgages until the economic picture is clearer.”

John Eastgate, sales and marketing director of OneSavings Bank, said: “Mortgage activity may have dipped in the first quarter and the forthcoming election will clearly add some complexity to the year, but the last few years have demonstrated very clearly that the mortgage market can negotiate the even the trickiest political landscapes, so with interest rates looking set fair to stay low, relatively strong levels of demand will persist.

“Long-term constraints still provide a note of caution. Demand still outweighs supply, adding pressure to the purchase market. The LISA may support demand in the long-term assistance, but if we don’t see supply increase, then affordability stretch will remain the stumbling block for prospective buyers.”

John Goodall, chief executive and co-founder of buy-to-let specialist Landbay said: “Mortgage lending held up well in March, as borrowers continued to take advantage of the more friendly purchasing conditions with record low interest rates and loan-to-value deals. First time buyers and remortaging activity drove lending volumes up as lack of supply and stretched affordability continued to impact the market.

“The coming months may tell an entirely different story for the housing market. Following the recent changes to buy-to-let tax relief and the introduction of tighter underwriting criteria, it is becoming even more complicated for aspiring homeowners and landlords to access the finance they need. What we now need are some firm commitments from the government to tackle the housing crisis. Positive measures aimed at encouraging the development of high quality rented properties will target the lack of supply across both sales and lettings in the housing market.”

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