20
Aug
Mortgage lending still increasing
Mortgage lending continues to rise, according to the latest
figures from the Council of Mortgage Lenders (CML).
Gross lending in July stood at £16bn, 26% higher than in
June, though still more than a third lower than in July last year.
Mortgage lending, house sales and property prices have all picked
up in the past few months after a dramatic slump caused by the
banking crisis. But the CML warned the housing market would slow
down again later this year. "The CML's July gross lending estimate
of £16 billion is the highest level in nine months and
consistent with the rise in house purchase approvals," said the
CML's economist Paul Samter. "We anticipate some seasonal slowing
in lending volumes and housing transactions over the latter part of
the year and the picture of a slow but more stable market to
emerge," he added.
Less expensive loans?
Typically, would-be borrowers now have to put down an average
deposit of 25% if they want to take out a mortgage.
The latest "Trends in Lending" report, from the Bank of England,
said there had been little sign of this rationing of the home loan
market easing up. "In line with rising mortgage approvals, gross
lending for house purchase has continued its recovery since the
beginning of the year, but remortgaging activity remains very
subdued," the Bank said in its August report. "The major UK lenders
reported that over the past month there had been no further
increase in their appetite to lend at high loan-to-values (LTVs),"
it added. The Bank's report pointed out that 90% mortgages had
become much more expensive, relative to 75% mortgages, than they
were before the banking crisis started in 2007. That was because of
the increased risk of default associated with the larger LTV
mortgages. But the Bank said some lenders had indicated to it that
if the risk of further house price falls eased off, they might make
their 90% mortgages slightly less expensive compared to their 75%
loans.
'Bounce-back'
The improvement in mortgage lending in July was due to the rise in
house buying usually seen during the summer, the CML said. But it
warned against exaggerating the improvement. It pointed out that
lending in July was still at its lowest for that month since 2001
and far lower than the July average of £27bn recorded in the
previous seven years. "But the bounce-back in activity from the
extreme weakness around the turn of the year, coinciding with a
seasonal bounce, is limited in how far it can go against the
current backdrop," said Mr Samter. Andrew Montlake, of mortgage
broker Coreco, said: "These latest figures support the general
feeling that some parts of the lending market are slowly easing,
particularly in the large mortgage loan sector. "However, there is
still a big squeeze in terms of availability and competitive
mortgage rates in the wider market, despite buyer demand being
strong," he added.
BBC News. (2009). Mortgage lending still increasing.
[Online]. Available from: http://news.bbc.co.uk/1/hi/business/8211204.stm
Accessed 20th August 2009.