New figures show month-on-month rise in mortgage loans

New figures show month-on-month rise in mortgage loans

Figures from the Council of Mortgage Lenders show an increase in mortgage lending in June although year-on-year figures are still grim.

The mortgage market experienced heightened activity in June as lending recorded a 17 per cent increase to hit an estimated £12.3 billion, up from £10.5 billion in May, according to new figures from the Council of Mortgage Lenders (CML).

Despite the positive development, the year-on-year picture is less than rosy because last month's lending represented a 48 per cent fall on the £23.8 billion figure seen in June 2008.

Second quarter gross mortgage lending figures, which stood at £33.3 billion, were generally static compared to the first quarter, which was the lowest quarterly level since the first quarter of 2001, the CML stated.

Explaining the data, CML economist Paul Samter said that "the pick-up in June's lending largely reflects seasonal factors, and these may well support lending volumes at moderately higher levels over the rest of the summer".

"But the combined effects of the restricted nature of mortgage funding, reduced number of active lenders, weak labour market and limited consumer demand are likely to hold back any significant and underlying improvement," he added.

Mr Samter went on to clarify that the CML's projections for gross mortgage lending of £145 billion this year remain unchanged.

Opinion among industry voices has been divided, with Peter Bolton King, the chief executive of the National Association of Estate Agents, stating that he is "not surprised to see lending down by 48 per cent from this time last year".

He singled out banks for blame for the low lending figures, saying that the organisation's research has shown that one in four people recognise the institutions as the biggest impediments to the recovery of the housing market.

"When prospective buyers are granted a mortgage in principle they are then faced with further difficulties in actually getting the banks to release the funds," he said, adding that lending should resume but not on levels seen 18 months ago.

However, the managing director of Smartlandlord.co.uk, Keshav Thukaram, was more positive, saying that "it's great news" that lending volumes are up in light of the difficult economic climate.

Mr Thukaram added that it is "good news for the stability of the housing market", although he also blamed lenders for limiting access to funding which, coupled with rising unemployment, "will constrain activity for some time yet".

He went on to highlight the fact that first time buyers and buy to let investors "are being penalised for longer" because lenders view them as risky customers.

Meanwhile, new mortgage products are being rolled out by lenders such as Nationwide, which has introduced new one and four-year fixed-rate mortgage deals.

While the one-year fixed-rate mortgage will be offered from 3.59 per cent, the new four-year fixed deal will be available from 5.28 per cent, with a third product, a three-year tracker mortgage, offering 3.99 per cent.