Gross mortgage lending recovers lost ground in May

Gross mortgage lending totalled an estimated £11.3 billion in May, report the Council of Mortgage Lenders.

Related topics:  Mortgages
Millie Dyson
20th June 2011
Mortgages
This represented a 12% increase from the £10.1 billion lent in April and was 1% higher than in May 2010.

Gross mortgage lending includes lending for both house purchase and remortgage. Despite a modest pick-up in overall lending activity during May, lending for house purchase is running below year earlier levels - as April Bank of England approvals data indicate.

Looking ahead, interest in remortgaging is now also likely to be less pronounced, as expectations of higher interest rates this year recede. The MPC once again kept rates unchanged at its June meeting - for the 27th successive month.

CML director general, Michael Coogan, comments:

"Gross mortgage lending in May recovered after low activity levels in April. Distorting effects from Easter and bank holidays cloud the current picture, but the likelihood seems to be for essentially flat levels of lending over the next couple of months."

David Whittaker, managing director of Mortgages For Business, said:

“May’s lending was strong because of pent up activity from the bank-holiday filled April but overall lending will not improve much over the rest of the year.

"The number of borrowers remortgaging will drop as the likelihood of a base rate rise moves further into 2012 and lending for house purchase has to improve markedly over the next few months to prevent overall lending sliding backwards. Lenders must do more than sitting on their hands hoping for the best and it’s great to see innovative ideas being tabled by the likes of Sir Callum McCarthy.

"This is exactly the sort of thinking needed to help push the market forward and pick-up the slack left by falling remortgaging and I hope others feel inspired enough to think about ways of helping the market rather than simply existing in it.”

Paul Hunt, managing director of Phoebus Software said:

“May’s rise in gross lending has been primarily driven by increasing remortgage activity, as high inflation put a rate rise back on the agenda. That rise now looks rather more distant and it’s probable the heat will go out of the market for remortgages until borrowers again start to worry about their repayments getting more expensive.

"Nevertheless, it would be foolish for borrowers to ignore the current price of fixed rate deals. Lenders are pricing mortgages more and more competitively, which is an indicator of increasing confidence. Taking advantage of this burgeoning price war could be the smartest move for borrowers looking to maintain the benefits of low rates for years to come.”

Ian Long, managing director of St Trinity Asset Management, comments:

“May’s rise in lending owes more to an increased appetite from borrowers to remortgage than to any sudden surge in new lending for house purchases.

"However, with any interest rate rise looking increasingly unlikely to be on the cards this year, remortgaging activity is likely to recede in the coming months as fewer mortgage holders fear an increase in their monthly mortgage costs.

"But it is crucial that borrowers on tracker rates and SVRs do not fall into the trap of believing that their current monthly payments are a ‘normal’ level, despite 27 consecutive months of historically low rates.

"When interest rates appear to be back on the agenda, we will see remortgaging activity rebound and lending levels increase accordingly as thousands look to lock into affordable fixed rates. But those that don’t must not be taken by surprise by an interest rate hike and face mounting mortgage payments that they have not planned to meet.”

Alison Beech, Business Relationship Director, Valunation, comments:

“Despite the bounce in gross mortgage lending in May, the figures are still not at anywhere near natural market levels. 

"A general lack of equity, house price instability, and reduced job security is not supportive of a confident borrower and lenders have structural constraints, both of which are keeping levels low."  
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