Bank of England and CML clash over mortgage figures

A strong rise in mortgage lending for house purchase in August has been reported by the Council of Mortgage Lenders.

Lending for house purchase rose by 11.7% compared with July, and by 10.8% compared with August last year.

A total of 55,300 loans were advanced for house purchase in August, worth £8.4bn, up from 49,500 in July and 49,900 in August 2011.

It was the largest number of loans advanced in one month for two years, said the CML, but its figures differ from those of the Bank of England, which said that approvals for house purchase in August stood at 47,665, 10% lower than in August last year.

According to the CML, loans to first-time buyers in August stood at 21,600 – up 13.7 on July’s figures, and up 18% on August 2011. There were only 2,600 fewer loans than in March when lending to first-time buyers was elevated by the end of the stamp duty holiday.

Average loans to value for first-time buyers was, however, 81% for a second consecutive month – the highest for three years, and highlighting the need for first-time buyers to have sizeable deposits.

By contrast, remortgaging plunged 10% on July’s figures, down to 21,700 remortgage loans.

Remortgage lending accounted for just 22% of gross lending in August, compared with 33% in August last year.

CML director general Paul Smee said: “House purchase lending showed an encouraging rise in August but it’s unclear whether this reflects just the unravelling of previous factors such as the Jubilee and the Olympic Games, or a shift in the underlying picture.

“We will wait and see whether schemes such as Funding for Lending and NewBuy provide a further boost to the market in coming months.”
 
Brian Murphy of the Mortgage Advice Bureau said: “We have seen applications for purchase and remortgage borrowing increase by 1.9% since August and they are now 7.9% higher than at the beginning of the year.

“This trend is set to continue and grow as we approach the end of 2012, spurred on by the imminent arrival of the Santander SVR increase, the availability of good-value 3% mortgage deals and increasing uncertainty about the economic prospects for 2013.”

But Richard Sexton, director of e.surv chartered surveyors, was more sceptical.

He said: “July was a weak month for house purchase lending – there were 5% fewer loans than July 2011. An improvement in August was always expected, and is by no means an indicator that house purchase lending has been given a new lease of life. And the Bank of England said loans for house purchase fell 10% year-on-year in August.

“The mortgage market is, at best, staggering on. It has not so much a mountain to climb as a series of very steep hills.

“The market has done an admirable job of trying to clamber up these slopes, but it is being dragged down again and again by high capital adequacy requirements, a squeeze on the money available to banks via the financial markets, and a congealing economy.

“Lenders are understandably reluctant to significantly increase house purchase lending while the economic backdrop is so threatening.”