Latest Bank of England lending figures show that lending secured on dwellings rose by £1.7billion in December 2013, compared to the average monthly increase of £1.1billion over the previous six months.
If these rises continue they will not be allowed to do so unchecked.
So what could happen next and what are the implications for the property letting and sales industry?
David Whittaker, managing director of Mortgages for Business, said: “The economic recovery and relatively cheap mortgage deals have allowed some lucky buyers to get onto the property ladder in recent months, but for most, rising prices and a lagging wage growth will keep a first home from becoming reality for a while yet.
“Housing remains less affordable than before the recession when compared to wages, and serious pressure continues to be exerted on the rental market to provide enough homes.
"Landlords are already plugging some of the gaps in the supply of UK housing as growing numbers make use of the equity they’ve built over the last few years to expand their portfolios, renovate existing properties and create new developments. Last year, buy to let mortgage rates were pegged back by strong competition between lenders. However, as the cost of funds continues to rise, it can only be a matter of time before lenders have to adjust pricing upwards to ease squeezed margins. Landlords looking for finance today would do well to consider five year fixed rates now before the increases start.”
Richard Sexton, director of e.surv chartered surveyors, said: “Mortgage lending is improving at lightning-speed. And that’s despite a usual December dip. Home lending has hit a six year high, as banks continue to offer cheap loans and interest rates – and repayments – remain low. Lenders have dramatically increased lending to borrowers with smaller deposits, which has encouraged heaps more first-time buyers out the woodwork and back to the market. And Help to Buy has given consumers a colossal confidence boost too, which has pumped up lending volumes further.
“But the heart of the market remains in London and the South East. In other areas of the country, the recovery is far slower. House prices may be increasing quickly, particularly in the capital, but it’s important not to withdraw Help to Buy too soon. In London, buyers need the scheme to get on the ladder. In many other areas, wage growth has been comatose since the crash - buyers simply don’t have enough income to save for the all-important deposit. Building more houses would be a far more prudent approach to capping price rises than trimming down Help to Buy prematurely.”
Duncan Kreeger, director of West One Loans said: “No one would deny that Britain is having a lending recovery – but there are still many pockets of the economy which aren’t feeling the effects. Mainstream finance is focused almost entirely on consumer mortgages, which is great for many UK households, but does nothing to help the growing need for business finance. While consumer lending surges ahead, lending to SMEs and businesses is limping behind – and the gap is widening.
“Mortgages aren’t a problem themselves – securing loans against property is an excellent way of reducing the exposure of lenders to risk while keeping the cost to borrowers relatively low. But without more business lending being made available to property developers, such an imbalance could aggravate the housing crisis. There’s plenty of reason to be optimistic in 2014 – but a recovery in lending that doesn’t cater for business can hardly be a recovery for long.”