Gross mortgage lending rose by 10% in January compared to the same month last year. While mortgage lending at £10.5bn was down by 14% compared to December’s total of £12.2bn, January was the sixth consecutive month of increase in year-on-year comparison. According to the Council of Mortgage Lenders (CML), gross mortgage lending in 2011 was just over £140bn, which was a 4% increase compared to 2010. 2011 was also the first year to see an increase in lending since 2007.

The chief economist of CML asserted that the main reason for this rise in mortgage lending is the end of the stamp duty holiday period in March. As he said: “The increase in lending compared to January last year helps support our view that housing and mortgage market activity may be boosted by first-time buyers seeking to complete deals before stamp duty concession ends in March.” Stamp duty is normally payable at 1% on all property purchases between £125,000 and £250,000 and was suspended for first-time buyers in April 2010 to boost the housing market. Others suggest that mortgage lending is not primarily driven by first time buyers looking for stamp duty concessions. For example, remortgage lending was 17% up in 2011 compared to 2010, while house purchase lending fell by 6%.

The broad consensus among experts is that first-time buyers’ demand is not the sole factor that has led to increased mortgage lending. Mortgage rates are currently at their most affordable levels for 14 years, there has been a recovery in the buy-to-let market and there’s an increased interest in investment in the rental sector. There’s also rising optimism and market confidence among consumers, and a marginal increase in household spending power. As Bob Pannell, chief economist at CML added, “Should inflationary pressures continue to fall back, the squeeze on household finances should ease progressively and help support stronger economic recovery going into the second half of the year.”

More optimism among UK households means an increase in demand and is certainly good news for the housing market. As Nicholas Leeming, business development director at Zoopla.co.uk pointed out, it is crucial for the UK housing market to maintain good levels of mortgage lending: “It is important that lenders keep introducing attractive and affordable mortgage deals to boost activity. If they don’t, we’re in danger of taking one step forward and two steps back.” Economic optimism and a rise in consumer demand can effectively contribute to avoiding a double-dip recession.

If you need residential conveyancing or legal advice on buying or selling a property, renting a property, mortgages or remortgages, contact Morgan Kelly Solicitors to find out more about our services.

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