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Mortgage experts divided on Funding for Lending impact in 2013

Ray Boulger
Ray Boulger

Mortgage industry experts are broadly positive on the outlook for gross lending next year although few agree on the extent to which the Government’s Funding for Lending scheme will impact on lending volumes.

Last week, the Council for Mortgage Lenders released its lending figures for October, revealing a 14 per cent increase in the amount advanced to borrowers to £12.9bn, up from £11.3bn in September.

In January, the CML said it expected lending for 2012 to reach £133bn. Gross lending for the year stands at approximately £118bn to the end of October.

CML chief economist Bob Pannell says: “House purchase and remortgage activity both appear to have picked up recently, and this should be supported by an improvement in the availability and pricing of mortgages.”

Given that the effects of the Government’s Funding for Lending scheme are just starting to be felt in the market, along with the assurance from the Bank of England’s Monetary Policy Committee that further rate cuts are unlikely, the consensus in the industry is that 2013 could well prove a more positive year for lenders and borrowers alike.

Figures from Moneyfacts show two-year fixed rates have come down by 0.5 per cent at 60 LTV on average since the introduction of the Funding for Lending scheme in August, from 4.47 per cent to 3.97 per cent.

Average five-year fixed rates at the same LTV have come down slightly more, from 4.07 per cent in August to 3.53 per cent today.

John Charcol senior technical adviser Ray Boulger is particularly bullish on the outlook for the market in the year ahead and says lending could reach £155bn next year.

He says: “The likely outcome of gross lending in 2012 will be between £144bn and £145bn. The first 10 months are showing around £3bn more than for last year and the Funding for Lending scheme is starting to have quite a good impact now.

“If lending volumes go up, it increases the likelihood that lenders will start to loosen criteria restrictions. There is still plenty of scope for lenders to do this.”

Although there are signs emerging that the Funding for Lending scheme is beginning to take effect, a number of industry figures feel it will not prove enough to significantly improve lending figures in the year ahead.

Intermediary Mortgage Lenders Association chairman John Heron says: “I think a ballpark figure of £140bn would make sense for 2013. It is hard to see where any major boost might come from. The general shape of the markets and the economy suggests there will not be a significant shift upwards in the market.

“The general weakness of the economy and the level of consumer confidence is feeding through to a very flat housing market, with prices slipping backwards. Increased capital requirements are placing further constraints on the market.”

Property analytics business Hometrack strategy, risk and economics director Gary Styles thinks lending volumes will remain largely stable and gives an estimate of between £135bn and £140bn for 2013. Styles says the broad scope of the Funding for Lending scheme means there is no guarantee it will significantly boost mortgage lending figures.

He says: “It is a very welcome thing for the market but there is nothing which says it has to go into mortgage lending specifically and we do not know to what extent it will just be substituted for existing funding.

“I do not see it having an enormous impact. It has enabled the market to continue as before rather than providing a major boost to the market.”

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