Mortgage and housebuilding figures offer hope

Published 20th Nov 2009

Healthier mortgage lending and housebuilding figures published gave hope of a return to better housing market conditions, but remained far below normal levels.

The Council of Mortgage Lenders (CML) said that the total amount of lending rose by 5 per cent to an estimated £13.5 billion last month, which it attributed to a significant pick-up in mortgages granted to homebuyers rather than to owners who are remortgaging from an existing deal.

Meanwhile, government data showed a quarterly jump in housebuilding of 18 per cent in the three months to September to 25,820 homes in England, reflecting the recent confidence boost that housebuilders have received from rising house prices.

New housing starts have risen for three consecutive quarters after falling by 32 per cent in the same period last year, followed by a 27 per cent decline in the final quarter of 2008. The rise between July and September was 16 per cent higher than the number of homes built in the same period a year ago. However, experts warned that the recent improvement in new home numbers would not be enough to match government targets or the huge expected rise in demand for housing.

Simon Rubinsohn, chief economist for the Royal Institution of Chartered Surveyors, said: “The latest figures are still weak in an historic context and suggest that the total starts for the year will struggle to come in much above 90,000. Significantly, this is barely a third of what is required over the coming years, given likely trends in demography and household formation. The numbers for 2010 should be a little higher, although, with development finance still constrained, we think it improbable they will reach 130,000, even with a recovery in the wider economy.

“The resulting shortfall in new property coming to the market represents a medium-term time bomb for the housing market ... making property increasingly unaffordable to large sections of the population.”

The CML said that the 5 per cent rise in lending was in line with typical seasonal increases between September and October and was not an indication of an underlying improvement. Total lending in October last year was 27 per cent higher at £18.46 billion.

Paul Samter, a CML economist, said: “The coming months are likely to be dominated by seasonal factors rather than underlying change.”

Source: ' Times '

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