Housing market recovery to continue next year

Recent improvements in the housing market should continue into next year, according to the Council of Mortgage Lenders (CML)

Gross lending is estimated to have increased to A?12.9 billion in November, helped by the Funding for Lending scheme which provides banks and building societies with lower-cost funding, which they are then supposed to pass on as home loans and loans to small businesses.

House sales are increasing and the improvement looks set to continue into 2013, with around 950,000 property transactions, A?156 billion of gross lending, and A?12 billion of net lending expected.

The CML tempered its optimism with a warning that the weak economy could dampen demand for mortgages.

Bob Pannell, chief economist at the CML, said: “Whereas the Funding for Lending Scheme (FLS) was conceived by the UK authorities to mitigate the worst impacts of a potential fresh credit crunch, its launch has in fact coincided with a more positive external funding environment, in part due to European Central Bank actions.

“Given this more benign context, in our view the FLS now has the potential to underpin a modest pick-up in mortgage lending activity.

“A key test, however, will be the extent to which greater borrower appetite materialises in response to better credit availability,” he added.

Last year the CML estimated that 825,000 property transactions would take place in 2012, but activity has been stronger than expected with 930,000 transactions expected by the end of the year.

In contrast to the CMLas positive outlook, a recent survey by the Building Societies Association (BSA) suggests that potential first-time buyers are less optimistic about their chances of buying a property next year.

More than a quarter of potential buyers surveyed by the BSA thought it would take them at least 10 years to save up a deposit to buy their first property.

Just 26 per cent of potential buyers thought it would take them three years or less, compared with 69 per cent prior to the start of the credit crunch in 2008.

Raising a deposit is the biggest barrier to property ownership, not just for first-time buyers, but across the whole range of buyers, the BSA said.