Mortgage lending in the UK will rise in 2016


Despite a dip in mortgage lending at the end of 2015, the Council for Mortgage Lenders (CML) says lending will grow this year.

The CML says that the dip was a seasonal norm as lending fell by 9% in November – though it was 17.6% higher than it was the year previously.

The rise over the year was, in part, down to rising house prices.

The director-general of the CML. Paul Smee, said: “November saw lending growth across all types and suggests continued improvement.

“We anticipate gross lending continuing a slow but upward trajectory over the next two years.”

First-time buyers getting mortgages

However, the number of first-time buyers getting mortgages fell nearly 8% in November to 27,900. Again, this was still 10.3% higher than the year previously.

The current low interest rate environment is also boosting affordability for first-time buyers, says the CML, with competitive rates meaning that these house buyers only spend on average 18.3% of their income on their mortgage. This is the lowest tracked measure ever recorded.

While things are looking good for first-time buyers, this is not the case for older people who have interest only mortgages.

According to research from Key Retirement thousands of people will see their interest only mortgage mature this year and they will be forced to sell-up since their property will not have enough equity to release.

Around 40,000 people may be affected with around half of these having no plan in place to repay the mortgage when it falls due.

Equity release lending is growing in popularity

This is one reason why equity release lending is growing in popularity with the average borrowing amounting to £72,000.

The firm’s Dean Mirfin said: “There are 60% of interest only mortgage holders who cannot be helped since their loan to value ratio is too high.”

Investors achieve higher profits with bridging loans

Meanwhile, research has revealed that investing in bridging loans delivers better profits than investments in fine wine or art.

The figures come from West One Loans who say private investors saw annual returns of 10.6% in the year to September 2015 for short-term loans.

In comparison, spending a similar amount on fine art would have seen a return of 3%.

Bridging loans offer investors stability

The firm’s director Duncan Kreeger said: “Bridging loans offer investors stability and greater returns than art, wine and gold.

“We expect this trend to continue and we work closely with intermediaries to ensure they are aware of the bridging market potential.”