Mortgage lending climbs for third month in a row to highest level for a year

Published 19th Aug 2010

Mortgage lending rose for the third consecutive month during July to reach its highest level for a year, figures showed today.

A total of £13.6 billion was advanced during the month, 5 per cent more than in June and the highest level since July 2009, according to the Council of Mortgage Lenders.

But the figure was still 4 per cent down on the £14 billion that was lent during the same month last year and the group warned that lending levels were likely to remain subdued for the rest of 2010.

The group last week revised down its forecasts for total mortgage lending for this year, reducing the figure from £150 billion to £140 billion, putting it slightly below 2009's level.

It also slashed predictions for net lending, which strips out redemptions and repayments, to £12 billion, compared with £15 billion previously.

The high street avoided a World Cup hangover in July as retail sales volumes jumped 1.1 per cent, official figures showed today.

The better than expected performance represented the highest month-on-month rise since February, the Office for National Statistics (ONS) said.

A strong rise in volumes for a broad mix of retailers, including sports equipment and jewellery shops, offset a flat month for department stores and lower household goods sales, the ONS said.

Shoppers are also likely to have been tempted in by price cutting on the high street after inflation figures on Tuesday showed the biggest slide in clothing and footwear prices for eight years between June and July.

But sales volumes from food stores were down 1 per cent month on month as the impact of the World Cup faded while prices also rose.

Household goods stores saw volumes fade 0.7 per cent month on month as the pre-tournament boom in flat-screen televisions faded slightly.

Overall sales volumes were up 1.3 per cent on a year earlier, although concerns remain over the prospects for the high street as the Chancellor's austerity measures loom.

Paul Samter, CML economist, said: 'It is difficult to see anything other than a slow market for the rest of this year as underlying activity remains subdued.

'The rest of 2010 is likely to see rather lower lending and transaction numbers compared to the same period last year.

'Late 2009 saw a pick-up as some home buyers looked to move before the end of the first stamp duty holiday.'

But he added that while lending levels are likely to be lower than expected, the vast majority of homeowners are not facing problems paying their mortgages.

The group expects 39,000 people to have their homes repossessed this year, down from its previous forecast of 53,000.

Data from the Bank of England, published today, also pointed to a slower mortgage market.

The bank's Trends in Lending report said the number of mortgages approved for house purchase 'edged down' in July.

It added that the availability of secured credit had not changed significantly since the beginning of the year, despite a rise in the number of different mortgage products on the market.

The major lenders expect mortgage lending to remain subdued in the coming months.

Andrew Montlake, director of mortgage broker Coreco, said: 'The modest rise in mortgage activity we've seen since May has been set against a low base, and although there has been a noticeable rise in the number of products available to borrowers, and more lenders returning to the market, the mortgage landscape is by no means close to returning to normal.'

Source: ' Daily Mail '

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