Throughout this year when commenting on lending figures and the lending arena in general, I have often used the word steady to describe the market. In years gone by, steady was not a word which set many business pulses racing but now it evokes a much more positive reaction.
A steady year has meant no big rollercoaster rides but it is still a challenging environment. The balancing act of juggling interest rates, rising household costs, risk, business volumes, swap rates, LTV and affordability is no mean feat and these factors will continue to be prominent in 2012.
But looking back to the start of this year, the subject at the top of the agenda for many consumers, intermediaries and lenders was speculation over Bank of England bank rate. There were contrasting predictions but on the whole many people suggested it would remain at 0.5 per cent.
In terms of lending, the year began with a relatively upbeat mentality on the back of data from the Council of Mortgage Lenders which showed that mortgage lending had stabilised in 2010 following very sharp falls in 2008 and 2009. And this positive sentiment carried into the first few months of the year with respectable lending levels and signs of growing demand, especially in the remortgage and buy-to-let markets.
Spring can often be a strange time when evaluating the lending sector as activity increases but we also get to reflect on the time of year when activity is generally at its lowest – December/January.
Add to this the abnormal amount of three-day working weeks, thanks to how Easter fell and the Royal Wedding, and this meant April was a highly fragmented month. Inevitably, this led to low lending levels and a slight intake of breath from those on the periphery of the market who were not privy to all the semantics.
Externally, it could have looked like the market was having a tougher time than it was and it made it difficult to gauge underlying lending trends with any certainty.
Research from Barclays reported at the time that mortgage affordability reached its best level in 10 years and that product numbers were on the up, with Mortgage Brain’s latest Monthly Product Analysis reporting a rise of 13 per cent in April to reach its highest point since September 2008.
Despite these contrasting factors, the early summer months saw the CML increase its gross mortgage lending forecast for 2011 from £135bn to £140bn. It also predicted gross mortgage lending of £150bn in 2012 and increased its net lending forecast for 2011 up from £6bn to £9bn. It also commented that lenders had made good early progress in repaying the funding advanced through official support schemes and large-scale refinancing of wholesale funding and that the availability of credit to support mortgage lending remained constrained but had eased a little.
The first half of this year saw a raft of new lender product launches, with many focused on the intermediary market. Even those lenders which may have been slightly dismissive of it in recent years appeared to be embracing the intermediary market in some form.
Figures released from the CML around that time showed that brokers accounted for 63 per cent of first-time buyer mortgages, 60 per cent of remortgage loans and 53 per cent of homemover loans in the first quarter of this year compared with 63 per cent, 56 per cent and 52 per cent of first-time buyer, remortgage and homemover loans respectively in the final quarter of 2010.
Based on value, remortgaging via intermediaries rose to 63 per cent in the first quarter of 2011 versus 59 per cent in the fourth quarter of 2010. This illustrated the growing momentum of the remortgage market which continued to pick up pace throughout the year thanks to increased competition, keenly priced products, rising LTVs and lower fees.
Gross lending for the second quarter was reported at an estimated £33.5bn, an 11 per cent increase from the first three months of the year (£30.1bn) and a 3 per cent decrease from the second quarter of 2010 (£34.4bn). Lending in the first half totalled £63.7bn, which was only slightly below the first six months of 2010 (£64.1bn).
Following the half-year interim results season, onlookers could be forgiven for getting the impression that it continued to struggle.
Overall, the first six months of 2011 certainly saw the return of more lenders and competition to the market.
But overriding factors including swap-rate volatility, a stagnant economy and a lack of base-rate movement all worked to constrict lending figures to varying degrees.
These months also saw the buy-to-let market really start to grab more and more headlines with commentators waxing lyrical about the opportunities on offer and with some justification. Additional data helped put even more meat on the bones with the CML showing that gross buy-to-let mortgage lending increased by a healthy 29 per cent in volume and 40 per cent by value in the second quarter of 2011 when compared with the same period in 2010.
The mainstream market was steady as she goes through the summer and autumn months but there was growing evidence that one area which had proved to be a huge obstacle for many borrowers was being chipped away at.
This year had already seen the emergence of some competition at higher-level LTVs and the autumn saw the announcement by Woolwich of its move back into the 90 per cent LTV lending market along with some other smaller players such as the Hanley Economic Building Society which also announced widening the distribution of its 90 per cent LTV and 95 per cent LTV mortgages to its six intermediary partners.
Precise Mortgages increased the LTV on its near-prime range to 85 per cent.
This momentum appears to be continuing into the winter months of this year, with decent levels of business being written and opportunities remaining in many sectors with the remortgage and buy-to-let markets remaining especially prominent.
Reflecting on 2011, it is difficult to get away from the word steady but the lending sector remains a work in progress.
There is no quick fix after the barren years we have had to endure but 2011 has added to some decent foundations that were laid in the second half of 2010.
Borrowing demand remains and more lenders are willing to lend, so let’s hope the markets continue to move in the right direction with innovation and competition being two words that feature a little more often than steady in the year ahead.