Gross mortgage lending in May (not seasonally adjusted) showed little change on the previous month or on the same month last year, according to the Council of Mortgage Lenders. It rose by 2% on the previous month to an estimated £16.2 billion, but was 3% lower than the £16.8 billion of lending undertaken in May 2014.

Forward indicators of lending, such as Bank of England data on approvals, suggest that the market can expect an upturn in lending over the coming months, reflecting the CMLs assessment that a modest recovery is under way.

CML economist Mohammad Jamei remarks in the CMLs monthly market commentary:

The economic environment is one that should support increased activity in the near term, coupled with low mortgage rates. But while we expect these factors to support activity, there is a limited upside, driven mainly by affordability constraints.

  • As we expected, activity in the housing market is showing signs of a modest recovery
  • The continuing improvement in the economy and household finances should support activity through the rest of this year
  • However the extent to which we see an increase in activity may be somewhat limited, given affordability constraints

Housing & mortgage markets

Housing continues to feature prominently in the political sphere and is likely to do so for some time given the Conservative party manifesto. Whilst last year housing featured heavily in the chancellors speech at the Mansion House, where the chancellor gave the Bank of England powers to place limits on high loan to income and loan-to-value lending, there were no housing references this year.

As expected, the Queen’s Speech included a housing bill which seeks to increase home ownership through an extension of Right to Buy, ‘starter homes’ for first-time buyers, planning reforms and measures to stimulate self-build.

We still await further details on Help to Buy ISA, the incentivised savings scheme to help first-time buyers, announced back in March’s Budget. This scheme will sit alongside other Help to Buy schemes, such as the mortgage guarantee, for which new data was released recently. It is likely that more information on this and other housing initiatives will be revealed in the upcoming budget on July 8.

Since last summer, housing market conditions have been a little subdued reflecting affordability, MMR and macro-prudential pressures in the regulated part of the market.

As we have expected over the past few months, the latest monthly lending figures show activity beginning to recover, though from a low base. Loans for house purchase were stable in April, compared to March, though there was a slight dip in the number of loans for remortgage.