Mortgage lending up 15% in June

Published 21st Jul 2010

Seasonal pick-up in mortgage loans – but experts predict activity will tail off later in the year as buyers 'wait and see'


Mortgage lending rose by 15% in June to an estimated £13.1bn from £11.4bn in May, according to figures published by the Council of Mortgage Lenders.

Gross lending was also 7% higher compared to June last year, when mortgage lending stood at £12.2bn, and gross lending in the second quarter of 2010 was an estimated £35bn, up 17% from the first quarter of this year (£30bn) and up 7% from the second quarter of 2009 (£32.7bn). However, lending in the first half of 2010 remained unchanged from the first half of 2009 (£65bn).

CML economist Paul Samter said that while the estimate represented a seasonal pick-up, the £13.1bn of lending is "still indicative of low levels of activity".

"There are signs of house prices stabilising and more properties coming on to the market following the abolition of home information packs. This may improve liquidity in the market, but transaction levels are subdued and likely to remain so while access to credit remains constrained," he said.

He added that the consultation paper on responsible lending would increase the regulatory burden on lenders and could make it harder for borrowers to access credit. The "austere" budget and expected job losses in the public sector also cast doubt on prospects for the housing market.

However, the increase in capital gains tax to 28% rather than the anticipated 40%, plus continuing low interest rates seemed to have encouraged many buy-to-let investors to hold on to their properties rather than flooding the market with new stock and depressing prices.

Brian Murphy, head of lending at independent mortgage broker Mortgage Advice Bureau said: "With looming public sector cuts, taxation rises, a freeze on wage increases and inflationary pressures, we are likely to see lending tail off during the second half of 2010, with buyers likely to take a wait-and-see approach. There's every chance that mortgage lending this year will be below the level of lending in 2009."

Jonathan Samuels, CEO, property finance specialists, Drawbridge Finance, agreed: "Mortgage lending may be up slightly, primarily due to seasonal factors, but in the short-term both the mortgage and property markets remain delicately poised.

"Ever-increasing supply and falling demand, driven largely by difficulties securing mortgage finance, could place downward pressure on prices in the months ahead. There is a considerable financing shortfall that is unlikely to be made up for some time yet.

"People who can secure mortgage finance will be calling all the shots. At one point, in late 2009, the balance of power started to swing back towards sellers but now they are very much on the back foot. The direction of prices could depend on why people are selling. Are they selling in order to beat further price falls, or are they selling because they have to?

"Properties at the higher end of the market, especially those in sought-after areas, are likely to be far more resilient, as mortgage finance is generally required at lower LTVs."

Six in 10 mortgages borrowed in June were for house purchase rather than remortgaging. Drew Wotherspoon, director of market at mortgage broker www.charcol.co.uk, said that homeowners seemed to be waiting for movement in the bank rate, or at least some indication of when it might move. He said: "Whilst this strategy is understandable, increasing numbers of borrowers could be considerably better off if they moved their home loan now."

He added: "The number of first-time buyers arranging a mortgage continues to be tiny, with the group accounting for just 5.4% of all transactions with John Charcol in June. This is the lowest it has been since December 2008 and suggests that a combination of strict lender criteria and inherent nervousness in the market continues to severely affect the amount of new entrants. This group desperately needs more competition in the 90% LTV market."

Source: ' Guardian '

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