Mortgage lending rises but market is ‘subdued’

Published 20th Apr 2010

Gross mortgage lending rose by 24 per cent between February and March, but the market is still “quiet and subdued”, according to the Council of Mortgage Lenders.

Gross mortgage lending in March reached £11.5 billion, up from £9.3 billion in February, the CML said. This was a 3 per cent rise on the same month last year.

However, mortgage lending usually rises at this time of year, because spring is traditionally a time when more people buy houses.

Lending for the quarter was still 24 per cent lower than the final three months of 2009 — the lowest quarterly lending total since the start of 2000.

Lending fell at the beginning of the year following a spike in December in anticipation of the end of the stamp duty holiday and the rise of VAT.

Paul Samter, an economist for the CML, said that the housing and mortgage markets remained “quiet and subdued”.

“Despite the increase in activity late last year and a subsequent fall early this year, the underlying position looks to have barely changed. But with the gradually improving economic backdrop and interest rates still low, we continue to expect a gentle improvement in market conditions later in the year.

However, Mr Samter warned that longer-term problems facing the market would limit its recovery. “Financial institutions still face the prospect of around £300 billion of official support schemes ending from next year, and will need to find alternative funding sources. This will likely limit how much new funding can be made available to the housing market.”

Rescue schemes such as the Special Liquidity Scheme, which was designed to encourage lending, and which has so far loaned more than £180 billion to the banks, will begin to close next year.

Source: ' Times '

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