“As most of the country finds itself awash with the wonders of the Great British summertime the vast shadow of the London Olympics looms long and large over the capital and beyond.
“The cost of the games is clearly up for debate with some MPs recently speculating that it’s at risk of going well over budget with security costs in particular reported to have rocketed.
“On a positive note the games has resulted in a large amount of regeneration to an area of London that has needed investment for some time. It also awards Britain with the opportunity to demonstrate the ability to handle a range of transportation, logistical, social and engineering issues in an efficient manner.
“Not to mention the resultant openings to boost tourism, inward investment and exports of British goods and services.
“These factors highlight the difficulty in accurately measuring the true cost of the games but it’s evident that the Olympic juggernaut will dominate both the media and the attention of the whole UK as we battle against mediocrity in the majority of athletic-based disciplines but no doubt excel on bikes, in the water and a few random sports along the way.
“From our perspective it will be interesting to see exactly what affect it will have on the mortgage market.
“Historically the summer months are a time when lending figures do tend to fall somewhat and the addition of the Olympics, like it or not, is bound to have some kind of additional knock-on effect and we have to calculate this into the lending equation.
“After the late spring lull in lending – which can be attributed to the end of the Stamp Duty exemption - we have seen much more positive figures recorded for May with the Council of Mortgage Lenders data showing gross mortgage lending to be an estimated £12.2bn, which represents a 24% increase on April’s £9.9bn.
“The latest figures from the Bank of England also show that gross lending hit £12.2bn in May, up from £11.6bn in April.
“In addition to these, according to the Building Societies Association, gross mortgage lending by building societies and other mutual lenders is said to have risen by 54% to £2.8bn in May 2012 when compared to £1.8bn May 2011. Commenting on these figures, BSA director general Adrian Coles added that nearly a quarter of the mutual sector’s new lending this year has been to first-time buyers.
“This is hugely positive news as we all know the problems this particular marketplace has experienced in recent years. Of course there is not one simple fix that can be used to mend this sector with wider economic issues, funding, affordability and LTV levels still proving to be difficult barriers to overcome.
“But increasing numbers of positive signs are emerging as a result of some lenders becoming more active and innovative within this space and government initiatives hoping to open up a few more doors.
“The latest government intervention has obviously come through the recent announcement regarding its £100bn Funding for Lending support package.
“Essentially this scheme is aimed at cutting banks’ funding costs in exchange for lending commitments and it has been reported that the new scheme could support up to £80bn of new loans.
“The FLS is predicted to provide funding to banks for an extended period of several years with rates being below current market rates and linked to the performance of banks in sustaining or expanding their lending to the UK non-financial sector.
“We still await full details of this scheme and the practicalities involved which means it is difficult to speculate, although no doubt many will, on the both the implications and the effects this may have on the overall mortgage market.
“But let’s underline that this is a positive move and one which should be applauded as should any government intervention which works to help stimulate the UK lending arena.
“According to the CML the May figures bring this year’s gross lending to £55.7bn which is largely in line with predictions that lending should reach close to £130bn by the end of the year.
“Looking on the bright side this figure may increase depending upon the impact of the FLS support package but it is likely that it will take until quarter three or more likely quarter four until we see just how much impact this has made.
“In addition to this central bank move we have also seen the Bank of England inject a further £50bn of quantitative easing into the economy after the International Monetary Fund suggested a boost was something Britain should consider. The programme of quantitative easing now totals £375bn.
“This is a move which ultimately emanates from the pinch being experienced on consumer spending power and is an attempt to increase consumer confidence as well as spending. In reality whilst this will help in time, similar to the FLS, the benefits won't be felt at consumer level immediately and the effects on the mortgage and housing market may be minimal especially in the short term.
“Moving forward the main drivers for the mortgage market, as always, will be innovation and product development.
“Harking back to the FLS proposals there is little doubt that access to cheaper funding lines can’t help but to help boost lending appetites over the long term.
“But in the meantime it remains lenders responsibility to continue supporting the intermediary market by working to improve service standards and arming it with competitive mortgage deals.
“So whilst as observers we put our feet up and marvel at the spectacle of the Olympics let’s hope that potential buyers, remortgagers, investors and developers don’t take the month off to do the same and that lending figures aren’t impacted too badly as a result.
“And if they are that the external markets don’t overreact and cast aspersions on what is now a relatively robust and progressive lending arena.”
