When it rains it pours

Thursday 17th September 2009

By Phil Whitehouse, head of The Mortgage Alliance (TMA)

The UK, especially within the confines of financial services, has become accustomed to bad news over the past couple of years or so. The changeable weather conditions experienced over the summer have also done little to help cast any rays of positivity over the country and it was left to a somewhat unexpected victory over the old enemy in the Ashes series to finally raise some smiles across the UK. But, of course, this being the UK when it rains it pours and this feel good factor was soon followed by news that the recession may be ending.  This news follows a record surge in confidence among business professionals according to research by the Institute of Chartered Accountants in England and Wales (ICAEW). The report suggests that optimism among professionals in the third quarter hit its highest level since the start of the financial crisis two years ago
The confidence measure jumped to 4.8 at the end of June from -28.2 in March - the biggest improvement since the survey began in 2003. The institute predicts that the economy will grow by 0.5 per cent this quarter, breaking five quarters of falling output.
This is the first highly-upbeat report in the UK which has lagged behind France and Germany in terms of recovery, as both are already officially out of recession. There is also some tentative positivity emanating from the mortgage market. 

The August Trends in Lending report from the Bank of England covers lending data from Santander, Barclays, HSBC, Lloyds Banking Group, Nationwide and Royal Bank of Scotland.  According to the lenders the proportion of mortgages being approved has gone from around 70 per cent in January to around 80 per cent in July. However, the lenders have admitted to the Bank that over the last month their appetite to lend at higher LTVs has not increased. This is not so good news as this is certainly one way which will kick start the market as long as this is done responsibly, of course.

All in all, gross mortgage lending flows increased over the same time period, rising from GBP 9bn to GBP 9.5bn but the Bank commented that this rise was outweighed by an increase in mortgage redemptions. House purchase advances in July were GBP 5.2bn while remortgage lending was GBP 3.3bn.

In addition to this, according to the latest data from the Council of Mortgage Lenders, gross mortgage lending rose 26 per cent in July to GBP 16bn. The lending figure jumped from GBP 12.7bn in June but still represents a 36 per cent decline from the GBP 24.9bn recorded in July last year.  The CML says the figures point to a modest improvement over the summer following "an exceptionally weak winter."  But the trade body says lending figures remain at historic lows as July's GBP 16bn of gross lending is the lowest July figure since 2001 and GBP 11bn lower than the July average over the previous seven years.

This is not a time to get too carried way though and caution remains key to these issues, especially in regards to the overall economic situation as there are still question marks over the strength and timing of the recovery.

As far as the mortgage market goes there are increasing signs that things are improving and encouraging rumours abound regarding both new entrants and returning lenders to the market. Stimulation in competition along with responsible rises in LTV will help elevate the market and whilst the rest of the year may see the market continue to stabilise, signs for 2010 are increasingly encouraging.

Phil Whitehouse is head of network, The Mortgage Alliance. The Mortgage Alliance has a loyal data base of 7,000 Directly Authorised mortgage intermediaries and as with most firms operating within the mortgage market it is having to overcome a number of obstacles in order to help members write business. He previously worked as a senior manager for Pink Home Loans and spent 25 years with Halifax/Leeds Permanent Building Society running various high street branches.

Phil enjoys golf but says: “No matter what I do I cannot get any better and I beat myself up crazily about something that on the face of it is such a simple game."