Gross mortgage lending falls 19%

Gross mortgage lending declined to an estimated £10.2 billion in April, according to the Council of Mortgage Lenders.

Related topics:  Mortgages
Millie Dyson
21st May 2012
Mortgages
Lending fell by 19% from £12.6 billion in March but was 2% higher than the total of £10.0 billion in April 2011.

In today’s CML market commentary, CML chief economist Bob Pannell comments:

"Mortgage lending activity has been relatively buoyant in recent months, with stronger lending for house purchase underpinning the more upbeat lending picture.

"The underlying picture is likely to be a bit stronger than the April figure suggests, because some first-time buyers are likely to have brought forward their transactions to March to take advantage of the stamp duty concession that was coming to an end.

"Eurozone developments are highly uncertain and have the potential to undermine UK economic prospects and conditions in our housing and mortgage markets.

"The underlying picture is likely to be one of easing momentum in the housing market, but with potential for a sharper downwards correction on bad eurozone news."

Paul Hunt, managing director of Phoebus Software said:

“Despite entering recession in the UK and with the eurozone circling the plughole, lenders have still managed to increase their activity since this time last year. Even more impressive is that this has been achieved in a month where fiscal policy has created a hefty headwind in the form of stamp duty.

"These figures emphatically demonstrate the utter hubris of the government in suggesting the stamp duty holiday did nothing to boost the first-time buyer market. Last month it launched lending violently upwards and now we’ve seen the corresponding fall.

"The industry must hope now that first-timers will be able to jump this additional fiscal barrier and keep coming to market. While that’s by no means certain, lenders’ consistently positive attitude to making finance available wherever responsibly possible provides a strong cause for optimism”.

Duncan Kreeger, chairman of West One Loans commented:

“If the eurozone crisis takes another serious turn for the worse – as looks likely – then mortgage lending to first time buyers could enter a state of near-paralysis. There is a big funding gap between supply and demand.

"Underlying borrower demand is actually very healthy, but banks and building societies don’t have the capacity to meet it. Not by a long shot. Net mortgage lending is 90% lower than it was pre-2008, and borrowers have to cross a painfully high threshold to get high loan-to-value mortgages.

"We deal with plenty of property investors looking for buy-to-let finance who have been turned away by high street banks. More of them are seeking alternative forms of finance. It’s a trend that is becoming more pronounced as the mortgage market falls deeper into a trough.”

Brian Murphy, head of lending at Mortgage Advice Bureau, says:

“So far this year mortgage activity has been stronger than predicted, but it has now slowed. The ongoing problems in the eurozone, combined with the UK moving into recession have hit lenders and also damaged consumer confidence.

 “Looking forward we expect momentum to continue to slow but just how much will depend on what happens with these other factors. If events take over then it will be more pronounced.

 “Our National Mortgage Index mirrors the CML’s findings, but its worth noting that even with recent rate increase for many people affordability remains good.”
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