Lending figures reveal that £12 billion worth of home mortgages were taken out in April 2013, which is higher than the £11.6 billion recorded for March 2013. This 4% increase is the highest level of growth that the mortgage lending industry has seen in more than four years. But even with this development, the Council of Mortgage Lenders (CML) says that the average value of new house loans is 'still barely half' of what it originally was before the economic crisis. The figure shown by CML is 21% higher than the data recorded for April 2012, but they warned that comparing the progress of the two months would be challenging, as the termination of the stamp duty holiday on properties valued up to £250,00 caused the death of loan sales immediately after.
Bob Pannell, CML chief economist, said, “The true underlying position is that April is likely to have been one of the strongest months for lending activity since late 2008, but not as strong as the year-earlier comparison suggests. Gross lending on a seasonally adjusted basis has been running comfortably above £12 billion for several months, but this is still barely half the average level of lending seen in 2003-4”.
The recent weeks have seen a number of warnings that the UK government’s 'help to buy' plan for borrower will lead to a new housing market bubble. The lending figures, which cover the months following the launch of the said scheme, indicate that the property market is already beginning to gather pace.
A separate set of data from the Office for National Statistics (ONS) shows further signs of an improvement, as it reveals that house prices in the UK went up by 0.4% over the month of April and that it increased by 2.7% in March.
However, the effect of such price increases in London and in the south-east region of England will be highlighted once these areas are excluded out of the equation. The ONS reported that if these regions were taken out, average home prices in the UK would be higher by 0.6% annually.
Howard Archer, a chief economist at HIS Global Insight, has said that he believes home prices would have 'a moderate gain of a few percent or so' in 2013.
“There is concern that the “Help to Buy” scheme could eventually fuel a housing price bubble, but we suspect that is unlikely in the near term given extended muted looking growth prospects,” he commented on the issue.
Archer went on to say that the current situation of the housing and lending industry is something that UK policymakers should keep a close eye on. “They must be prepared to quickly pull the mortgage guarantee scheme at the first sign of any housing price bubble developing,” he said.
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