Assetz® News - Mortgage lending tops February record

Mortgage lending tops February record

22nd March 2006 |

With Gordon Brown announcing today that the UK economy is in good shape and that it has again grown faster than its European rivals, the Council of Mortgage Lenders (CML) brought more cheer with news that mortgage lending reached record levels in February.

Homebuyers borrowed a total of £21.8 billion in the month, which represents a huge increase on the £17.9 billion last year.

It is a statistic that again emphasises the strength of the UK property market, with confidence back with a vengeance and buyers eager to make a move as prices continue to rise steadily.

Typically, February is the weakest month in the year for house purchases, with a notable slump between the more active autumn and spring seasons. Many also await the Budget, while the post-Christmas blues inevitably lead to a slowdown in consumer spending.

With this in mind, Michael Coogan, director general of the CML, has said that the results are impressive and reflect the remarkable transformation of the market in such a short period of time.

"Confidence in the housing market is strong and demand has returned to the levels we witnessed two years ago," he said.

"Areas which saw sluggish activity over the past couple of years such as London and the south-east are now seeing a clear strengthening in house prices," he added.

Looking ahead, Mr Coogan has said that 2006 will remain strong, with the levels of confidence unlikely to dip in the foreseeable future. He added that the economy is in good shape, while stable interest rates are currently sustaining a steady rise in property values.

The National Association of Estate Agents (NAEA), meanwhile, has referred to "an energetic market in the run up to the Budget" with sales figures climbing considerably in February, helped by interest rates and employment levels.

There was a 30 per cent increase in sales per agent from ten to 13 in the month, reflecting a ten per cent rise on the same month in 2005. The NAEA reports that consumers were "clearly feeling optimistic" in February, while there was also good news for buy-to-let landlords.

The average time to let a property fell from 14 to 12.7 days, as demand for rented accommodation continued to rise.

The only concern for the NAEA was the fact that first-time buyers had a smaller share of the market when compared to the previous month, prompting NAEA President Christopher Hall to call for changes in today's Budget.

It would seem that Mr Hall got his wish, with the chancellor announcing plans to provide £970 million for shared equity schemes in a plan designed to get 35,000 first-time buyers onto the property ladder.

In addition to this, the initial stamp duty threshold will be raised from £120,000 to £125,000 to give as many people as possible the chance to avoid the tax when making their first purchase. The legislation will come into effect tomorrow.

While there are still reservations in some quarters about the potential impact of home information packs (Hips), the property market is undoubtedly in good shape, adding weight to the argument that property investment is again rivalling stocks and shares.