Mortgage lending rises: Scotland votes 'No', but uncertainty remains

Friday, 03 October 2014

So everything’s back to normal for lenders now the referendum's over, right? After all, the latest figures from the Council of Mortgage Lenders (CML) show a steady increase in lending during August, and estate agents are confident that Scotland's vote to stay with the UK will improve things on the housing market. But it may not be all plain sailing just yet.

Figures from CML members reveal total lending of £18.6bn in August, which is 13% higher than the same time last year. The figures also show a continuing rise in house prices, which the Office for National Statistics says have now surged by 11.7% in the 12 months to July 2014. The average British home will now set you back £272,000, and most regions have witnessed house prices rise above their pre-financial crisis peaks.

The mortgage industry has also welcomed the outcome of the Scottish independence referendum. The 'No' vote means that many institutions, including Lloyds Banking Group, Royal Bank of Scotland, Clydesdale Bank, Standard Life and Aegon UK, will no longer be faced with packing their bags and moving down to England. Association of Mortgage Intermediaries chief executive Robert Sinclair told Mortgage Strategy that "the uncertainty around independence would have placed sterling and interest rates under great pressure, and subsequently mortgage rates and payments”.

But others see problems with the continuing rise in house prices. The National Housing Federation (NHF) have claimed that home ownership is fast becoming an "exclusive members' club", commenting: "First time buyers today have to earn more, borrow more, stump up a larger deposit and rely more on family wealth than even a generation ago."

First time buyers are currently faced with borrowing 3.4 times their salaries, twice as much as a buyer would have needed back in 1979. The NHF said that "only the wealthiest of the next generation will be able to buy a home if current trends continue".

There are hopeful signs that the market may yet cool. CML Chief Economist Bob Pannell has said: “A gentle slowing of lending activity may now be in prospect, as a result of the continuing impact of tighter lending rules and a softening of the London market”. We only hope those lucky enough to own their home have protected it with the best home cover.


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