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Mortgage Lending Rebound in March

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Figures from the Council of Mortgage Lenders (CML) have shown that mortgage lending picked up in March after a lull at the start of the year.  In fact home loans being taken out in the month rose by 21% compared to February.  Gross lending reached an estimated £11.3bn in March but this still represented a 2% drop on March 2010.


The more reliable quarterly comparison shows that gross lending for the first three months of 2011 was £30.1bn – an 11% decline from the fourth quarter of 2010 but a 1% increase on the first quarter of 2010.


“The housing market has emerged hesitantly from hibernation”, said CML Chief Economist, Bob Pannell, “household finances are under a lot of pressure, and as a result demand for house purchase loans fell in the first three months of 2011.”  He also said that lenders expected mortgages to become more available over the coming months, helping to boost the current low levels of house-buying activity.


A remortgaging trend has emerged over the last few months, which has helped underpin lending figures.  Fears of a rise in the base rate of interest has prompted this activity, as homeowners scramble for a competitive fixed-rate deal – leading to remortgage approvals in February being at their highest level for over two years.


The Property Gap Widens


What many of these national surveys don’t pick up on is how the property gap continues to widen with that in popular areas such as London and its commuter belt continuing to rise in value, as property in the north continues to fall.  Research by the Centre for Economics and Business Research (CEBR) has shown that the top 20% and the bottom 20% of the housing market are continuing to diverge.


For example, the five most expensive property areas in the UK (Boroughs of Kensington and Chelsea, Camden, City of Westminster, Hammersmith and Fulham and Islington) all saw the average house price rise by 0.5% in March.  Whereas at the other end of the spectrum, the cheapest five areas (north-east Lincolnshire, Kingston-Upon-Hull, Merthyr Tydfil, Blackburn and Darwen and Stoke-On-Trent) saw their house prices fall by 0.5% in March.


The graph below clearly shows that, although the property at the top of the market took a similar dive in value to that at the bottom during the most recent property slump, the peaks are nowhere near each other and, more worryingly, the most recent activity shows the bottom 20% clearly falling away as the top 20% climbs.  Analysts believe that this will continue to be the case, until the economic recovery starts to filter out of London and the south-east into the rest of the country – whenever that may be.


Annual percentage change in property price chart