In announcing a 24% rise in gross mortgage lending in March, the Council of Mortgage Lenders (CML) has also raised concerns about the longer-term prospects for UK mortgage finance.
CML economist, Paul Samter, is predicting that an improving economic backdrop and low interest rates should produce “a gentle improvement” in market conditions this year.
However, he expects the longer-term problems facing the market to remain because, from the beginning of next year, banks need to start repaying the billions they have received in taxpayer support.
According to Mr Samter, the need to shift to alternative funding sources is likely to “limit” the amount of new mortgage finance available.
Moody’s has used slightly stronger wording, having already warned of the possibility of a mortgage famine from the start of 2011.
The credit rating agency estimates that the UK’s financial institutions borrowed a collective £319 billion from the Government during the credit-crisis stricken years of 2007 and 2008.
The sum amounts to one-quarter of the UK’s entire £1.3 trillion residential mortgage book, and Moody’s is expecting banks to limit their lending from the start of next year, by imposing ever tighter criteria for borrowers.
The firm is also predicting that some smaller lenders will be forced into mergers as a result of the contraction.