Mortgage lending in 2015 stronger than forecast with £214bn of home loans

Mortgage lending has been stronger than expected this year, with around £214 billion-worth of home loans being handed out across the UK during 2015, banks and building societies have reported.

The Council of Mortgage Lenders (CML) has revised its forecasts upwards for this year and 2016.

It said that lending is set to end this year stronger when it started, helped by the recovering economy and cheap mortgage deals for borrowers to choose from.

In January, around £14.7 billion-worth of mortgages were handed out, and the CML said that in November this figure was estimated at £19.9 billion.

Mortgage lending in November was around 23% higher in November this year than in November 2014.

The CML, which previously estimated that £209 billion-worth of mortgages would be handed out during 2015, has now revised this figure up to £214 billion.

Next year, it now expects £237 billion-worth of home loans to be handed out, up from a previous estimate of £230 billion.

And in 2017, around £261 billion of mortgages will be advanced across the year, the CML predicts.

CML economist Mohammad Jamei said: "Lending is set to finish the year stronger than it started, with the pace of lending recovering over the summer months.

"As we've said for the best part of 2015, lending continues to be supported by strong fundamentals, which are low inflation, strong wage growth, an improving labour market and competitive mortgage deals.

"Reflecting this recovery, we estimate lending this year to reach £214 billion, up from our earlier estimate of £209 billion."

Looking ahead, the CML said that the number of house sales taking place will continue to be limited by housing affordability pressures and housing supply shortages.

It said that while there have been Government efforts to inject more activity into the housing market with schemes such as Help to Buy, these may be slow to have an effect.

Meanwhile, the buy-to-let sector will face a "challenging period" next year the CML said, as a three percentage point stamp duty increase kicks in for buy-to-let investors from April.

The CML said that, as a consequence of the change, "we expect higher activity levels in the first quarter of 2016 than would otherwise have been the case as some landlords bring forward purchases to avoid the stamp duty hike before it comes into effect".

This ramped up activity is expected to be followed by a fall after the change comes in, the CML said.

Overall, the body said it expects buy-to-let house purchase activity in 2016 to fall below levels seen in 2015.

The CML said that although financial markets currently see interest rates starting to rise at the start of 2017, it thinks this is more likely to happen in the second half of 2016. The Bank of England has indicated that any increase in the base rate, currently held at 0.5%, will be small and gradual.

The CML said that overall, it expects the majority of borrowers to cope with any modest interest rate rises that start in the second half of 2016, with limited deterioration in the numbers of people falling into arrears or having their homes repossessed.