Blog: Phil Whitehouse

Monday 21st February 2011

It seems a little odd still talking about 2010 when we’re heading towards the business end of February. In fact, thinking about it, where have nearly two months of this year already gone?

But perhaps we should reflect on what a truly unremarkable year 2010 was in terms of mortgage lending. And I certainly don’t mean this in an overly negative way.

There are some who may point to ‘unremarkable’ as being a term still not good enough for the mortgage market, and in a way that is true.

However, being realistic, as we have all had to be in recent years, if I was writing this column in February 2010, I estimate that the majority of us would have stuck on ‘unremarkable’ as a description of the year ahead rather than risk having ‘disastrous’ being bestowed upon us, as was the case for 2008 and most of 2009.

So to really assess the performance of the market in 2010, let’s take a look at the actual breakdown of the recent data outlined by the Council of Mortgage Lenders (CML) which shows that mortgage lending stabilised in 2010 following the obvious very sharp falls in 2008 and 2009.

Data from the trade body says that there were 529,300 loans advanced for house purchase in 2010, worth £77.1bn, an increase of 3% by volume and 11% by value compared with 2009. Loans for remortgage were at a 13-year low, totalling 313,200 and worth £39.3bn in 2010, down 23% by volume and 24% by value from 2009.

House purchase lending in 2010 accounted for 57% of all mortgage activity, up 9 percentage points from 2009, and loans for remortgage accounted for 29%, down 7 percentage points from 2009.

When analysing these figures further, there is little to add to the sentiments of Michael Coogan, director general of the CML, when he said: “2010 was about the mortgage market continuing to adapt to the post-credit crunch environment, and the full year data shows that the lending industry is now on a more stable footing but at historically low levels of activity. House purchase lending held up, and shows the market is open for business. However, it is still not serving all customer groups that may want to borrow, in particular those without a significant deposit.

“Access to funding for lenders is expected to stay under pressure this year, but it will now be matched by lower consumer demand due to the economic backdrop and a range of uncertainties which will impact the timing of borrowing decisions. We conclude that this will lead to gross lending levels in 2011 staying flat compared to 2010, with downside risks.”

This is a timely reminder for everyone concerned in the mortgage market not to get too far ahead of ourselves as it’s evident that many challenges remain. But it’s also important to point out that there are also a number of opportunities for firms encompassing a holistic advice process.

So whilst the private residential markets look forward to a year of stability, there is also some optimism ahead for SMEs after the recent announcement from Chancellor George Osborne that the UK’s biggest banks will lend £190bn to businesses this year through the Project Merlin initiative. Details of Project Merlin showed that of this figure, £76bn would be available to SMEs – an increase of £10bn on last year.

The Government has said that these lending targets would be among the performance targets used to determine the bonuses of bank chief executives. This is welcome news but inevitably opens up a flood of questions, such as is this enough and how will they police that the smallest firms and new start-ups receive this vital supply of cash.

As with most government initiatives, there is enough ambiguity to wonder if this will actually make any impact, or is it simply political and more rhetoric without sufficient framework to actually make it happen. The devil, as always, is in the detail.

So, in conclusion, lending to business and individuals appears to have reached some form of stable platform. All we need now are lenders to be a little more innovative in their offerings to really help kick-start these markets.

Of course, risk rightly remains a huge consideration, but there are some increasingly positive signs, especially in the specialist lending sector where intermediary lenders are starting to find their feet once again.

Let’s hope that 2011 takes a small step forward from unremarkable and possibly even enters the realms of normality.

 Phil Whitehouse is head of The Mortgage Alliance (TMA)