Housing round up: mortgage lending still subdued, whilst rents rise


Housing & mortgage round upA quiet week on the housing front has seen new figures released which show mortgage lending is still flat, whilst private rents have been rising.

Mortgage lending

The Council of Mortgage Lenders (CML) say that mortgage lending is still subdued; total lending in September stood at £12.9 billion, down by 2% on August, but up 4% on the same time last year.

As it released the figures the CML warned that lending might fall away in coming months. Bob Pannell, chief economist at the CML, said:  “The housing market is very sensitive to wider household confidence, and this seems likely to weaken over the coming months in response to the latest spike in consumer prices and headline unemployment figures.”

There is also a feeling among some industry experts that mortgage lending criteria may tighten in months to come as banks and building societies find wholesale funding harder to come by. One lender has already increased their standard variable rate to offset higher wholesale funding costs and there are signs that some lenders are focusing on buyers with larger deposits.

Richard Sexton, from e.surv, the chartered surveyors, said: “With the supply of credit so restricted, there is almost no scope for them to grow their loan books, so they are understandably playing it safe and focusing on targeting borrowers with big deposits.”

Rents rising

Unsurprisingly with mortgage lending down significantly on previous years the rental market has seen a surge in demand which seems to be pushing private rents up.

Figures compiled by LSL Property Services, which owns a number of estate and letting agents, show that average rents in the private sector rose by 0.7% last month in England and Wales, hitting a new high of £718 per month.

Last month’s rise means that private sector rents have risen by 4.3% over the past year, equivalent to £29 per month extra/ The South East and East Midlands have see the largest increases.

It is clear that the effects of tight mortgage lending criteria and the fall in property prices has increased demand for rental properties which has caused prices to rise. David Newnes of LSL agrees: “In many cases, buying a home is now cheaper on a monthly basis, provided renters can get past the stumbling block of the substantial deposit requirements”

He continued: “For the majority, saving a £25,000 deposit is a Herculean task as inflation and rents climb, and most would-be buyers are biting the bullet and prolonging their stay in increasingly costly rental accommodation.”

“As things stand, we won’t see competition amongst prospective tenants diminish without a substantial expansion in the supply of rental properties available on the market.”