Shaky mortgage lending underlines need for strong rental focus

Mortgage lending to home buyers fell last month, letting down previous optimistic forecasts of a recovery in the sales market.

The Council of Mortgage Lenders estimates that total gross mortgage lending declined to £10.4m in January.

This was 9% lower than December’s gross lending figure of £11.4bn and a 3% fall from £10.7bn in January last year.

The CML’s latest figure comes just days after it predicted that gross mortgage lending for this year would rise 9%.

American-backed build-to-let developer Essential Living said the figures showed a need for more focus on the private rented sector.

Martin Bellinger, executive director of Essential Living, said: “It’s further proof of the pressure on first-time buyers that makes the case for building rental homes even greater. What consumers need is professionally managed rentals, and councils could forge long-term income streams by finding innovative ways to bring land to the market.

“Our institutional backers are committed to long-term ownership of homes, and for policy makers keen to enhance public realm and improve amenities, this is a win-win.”

Essential Living, which has over £200m in backing from M3 Partners, originating from the Washington State Pension Board, is the first UK firm set up to focus on building private rented homes in the UK.

David Whittaker, managing director of specialist buy-to-let lender Mortgages for Business, said that the CML figures underlined the strength of the buy-to-let market.

He said: “The first-time buyer market is still stuck deep in the mire. Despite the improvement in house purchase lending over the last couple of months, first-time buyer numbers are bumping along at just 46% of the level they were at before the Lehman collapse.

“There have been tentative improvements in the mortgage market over the last couple of months: rates are lower, choice is wider and lenders are growing in confidence. But it will take a sustained period of growth to propel the housing market back to anything like its former strength, which looks unlikely while the economy is so weak.
 
“It’s a different story in the buy-to-let market, where gross lending increased 19% in 2012. Rates have fallen and the number of lenders offering buy-to-let products has risen to 27 – the highest since the financial crisis.

“The ongoing problems in the first-time buyer market are helping to keep gross yields on buy-to-let property healthy, and I expect this to continue for some time.”