Mortgage lending highest since 2008

HousesMortgage lenders have reported their strongest month in almost five years, in further evidence that the housing market is bursting back into life.

An estimated £16.6 billion worth of mortgages were advanced to borrowers in July, marking the highest total seen since October 2008, the Council of Mortgage Lenders (CML) said.
This means that mortgage lending has soared by almost one third (29%) compared with the same month last year, as well as climbing by 12% on the previous month.

The figures are the latest in an avalanche of reports which have pointed to a housing market revival, with some particularly strong evidence of this seen in recent weeks.

Last week, the CML, which represents banks and building societies, reported that first-time buyer numbers have risen to their highest levels since 2007, while the Royal Institution of Chartered Surveyors (Rics) said that house prices are rising at their fastest rate since 2006.

Meanwhile, asking prices on flats have reached an all-time high, property search website Rightmove reported yesterday. It put this down to strengthening demand for this type of property from people who are trying to take their first step on the property ladder as well as buy-to-let investors who are also being encouraged into the market by reports of decent returns to be made.

Asking prices in London are up by 10% compared with a year ago as confidence flows back into the market, according to Rightmove's findings.

CML market and data analyst Caroline Purdey said the body's lending figure for July reinforces "a growing evidence base of a strengthening in the housing and mortgage markets".

Government schemes such as Funding for Lending have been credited with boosting activity by widening mortgage availability. Initiatives such as NewBuy and Help to Buy have also been launched to give those with smaller deposits a helping hand.

The strength of the uplift in house prices seen already this year has taken some experts by surprise.
Particular concerns have been raised about the potential for a house price bubble to be created following the second phase of Help to Buy, which from next year will underwrite £130 billion of low-deposit mortgage lending with state guarantees.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: "Borrowers must not get carried away, buy sensibly and take care not to overstretch themselves, whether they are planning to live in the property or rent it out."

He said that despite the strong uplift reported today, the housing market recovery will be "long and slow".

He added: "Lending levels are still running at a fraction of what they were at the height of the housing boom."

There have also been calls for the Government to step up its efforts to build more homes as activity lifts. Housing charity Shelter recently warned that less than half the houses are being built in England each year than are needed to tackle the "chronic shortage of homes".

Housing Minister Mark Prisk said: "Today's figures show our Funding for Lending Scheme, and record low interest rates, have led to the highest level of mortgage lending since 2008.

"But alongside this, we're also pulling out all the stops to get Britain building, and the increased availability of mortgage finance is boosting confidence in the housing market, and encouraging housebuilders to invest in building more new homes.

"We've also been working with the mayor to invest billions of pounds to deliver the fastest rate of affordable housebuilding for two decades. And it's why we're freeing up councils to make it easier to convert existing unused buildings into new, much-needed homes."

The top ten DIY projects: are they worth it?
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Mortgage lending highest since 2008

Of course with all these things, the value it adds depends on the property you have to start with, and the kinds of improvements you make, but Which? estimates the cost of a new kitchen at £8,000 and HSBC calculates the added value to your property at £4,500 - which is a clear loss.

This has been done by 41% of people in the last three years, and 29% of people plan it in the next three. It's cheaper than a kitchen, and Which? estimates the cost at £3,000. This is roughly the same value that HSBC says it will add to your property - so you'll break-even.

This has been installed by 31% of us in the last three years, and 15% plan it in the next three. Installing central heating is a disruptive job, and according to WhatPrice it will cost you around £3,235. However, this is the first of the top ten to actually pay off. Property expert Phil Spencer says it will add £5,000 to the value.

Some 18% have added one in the last three years, and 30% will in the next three. This is another huge job, but with more people struggling to move and deciding to improve instead, it's increasingly popular. The amount it costs will depend on an enormous number of things, from the area you have to work with, to the size of the extension. However, assuming you add a single room you could spend around £20,000. HSBC estimates it will add around £15,500 to the value of the property, so you are unlikely to gain as much as you spend.

17% have done one of these in the last three years, and 20% will in the next three. This doesn't have to cost more than a couple of hundred pounds, but according to a survey from Halifax a few years ago it costs an average of £850 and adds almost £1,500 to the value. This is the second financial sound project in the list.

11% of us have knocked rooms through in the last three years and 8% will in the next three. If you're creating more usable space, then buyers won't mind you are reducing the number of rooms. If it's a supporting wall you can end up spending around £1,500, whereas a non-load-bearing wall should be doable in a day with a laborour and a plasterer for a couple of hundred pounds. It's unlikely to specifically add value though.

8% have put them in over the last three years, and 8% plan to in the next three. A solar panel costs about £6,500. It's definitely not going to add value to your property. However, it can pay off. With a feed-in-tariff you can save yourself £600 a year in heating, and can sell up to £450 back to the grid. The lifespan of the panel should be 20 years, so you'll break even after six and a half years and start making money. It's the third wise financial move here.

6% have done this in the last three years and 11% plan to in the next three. According to HSBC it adds the most value - at an average of £16,000. However, at a cost of £20,000 or more, it won't make you money.

4% of people have added one in the last three years and 7% plan to in the next three. As with a similar extension, you're likely to spend £20,000 and add £15,000 of value. So it only makes sense if your family is too big for the house.

2% have converted the cellar in the last three years, and 4% plan to in the next three. This is not a great way to see a return on your money - unless you live in the kind of area where you are absolutely out of any other options when it comes to making more space. It's not cheap - starting at £10,000 for simple waterproofing and finishing, to £50,000 for more intensive work. It will typically add £20,000 to the property.

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