Mortgage lending rises to highest levels in six months as new home buyers buoy market

Published 21st Jul 2009

Mortgage lending rose to its highest level since December with a 17 per cent hike in advances in June, figures showed today.

The Council of Mortgage Lenders revealed a total of £12.3 billion was lent last month thanks to a seasonal pick-up in house-buying activity.

Its latest statistics reveal that gross mortgage lending stood at an estimated £33.3 billion for the second quarter.
Mortgage lending

Mortgage lending has risen to its highest levels in six months thanks to a seasonal pick up in home buying

This figure remained unchanged from the first three months of the year, which was the lowest quarterly reading since early 2001.


The CML added that lending levels were likely to rise moderately throughout the rest of the summer months.

But it warned the ongoing clampdown among lenders would hold back any significant improvements and stuck to its annual forecast for £145 billion in gross mortgage advances.

Last month's estimated lending figure confirms signs of better property market conditions in recent surveys.

They also reveal the marked change in the sector since last autumn's financial crisis when lending was 48 per cent below the £24.8 billion seen 12 months previously.

CML economist Paul Samter said: 'The combined effects of the restricted nature of mortgage funding, reduced number of active lenders, weak labour market and limited consumer demand are likely to hold back any significant and underlying improvement.'

However, figures also out today from property website Rightmove suggests the heavy house price falls may be behind the market.

Its figures for the month to July 12 show asking prices rose by 0.6 per cent to an average of £227,864, marking the fifth monthly rise this year.

Howard Archer, economist at IHS Global Insight, said today's CML data added to hopes that buyer interest has picked up and that property prices had bottomed out.

He added: 'Much will clearly depend on whether the economy can sustain its recent overall improvement or suffers a renewed dip in activity, how much further unemployment rises, how quickly and to what extent credit conditions ease, and how many properties come on to the market over the coming months.'

The Bank of England also released its monthly report on lending trends today, which confirmed a rise in loans for house purchases and expectations for this to continue over the coming months.

Signs of stabilisation in property market activity and prices resulted in lenders starting to become more flexible on loans-to-value and offer products which demand lower up-front deposits, albeit at higher rates, the Bank said.

But its survey of all the UK's six major lending groups confirmed fixed rate mortgages had gone up in price.

This was partly due to wholesale funding costs, which have increased amid expectations of higher future interest rates, but also due to soaring demand for fixed rate deals since January.

The Bank's report also showed that the flow of lending to businesses fell at a slower pace in May, down by £3.4 billion compared with a £6 billion plunge in April.

Source: ' Daily Mail '

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