Mortgage lending falls despite hype over cheap rates

Mortgage lending fell last month, letting down previous optimistic forecasts – despite the mortgage rate war created by Funding for Lending.

The Council of Mortgage Lenders estimates that total gross mortgage lending declined to £10.4m in January.

This was 9% lower than December’s gross lending figure of £11.4bn and a 3% fall from £10.7bn in January last year.

The CML’s latest figure comes just days after it predicted that gross mortgage lending for this year would rise 9%.

However, the CML was undaunted by the seeming setback, insisting that a recovery is under way.

CML market and data analyst Caroline Purdey said: “Housing sentiment remains positive, despite ongoing economic pressures. A worsening in the outlook for inflation presents a greater headwind, but we still expect the Funding for Lending scheme to lift activity over coming months.
 
“House purchase activity was robust into the start of 2013 on the back of better mortgage availability and pricing, and we share the Bank of England’s confidence that this will continue over the coming months.”

Brian Murphy, head of lending at Mortgage Advice Bureau, agreed with that view.

He said: “The outlook for brokers and borrowers remains upbeat, despite the continuing economic pressures and the drop in gross mortgage lending in January. 

“Activity within the MAB network was strong in January, with total cases up by almost 17% year-on-year as mortgage applicants were increasingly tempted to take advantage of the competitive prices on offer.
 
“We are still adjusting to a new environment when it comes to mortgage rates, with little difference between average two- and five-year deals. 

“Our National Mortgage Index shows three- and five-year rates last month were the most competitive since our records began in summer 2007, and with the Funding for Lending scheme encouraging lenders to boost their activity, there should be no shortage of consumer demand at these prices.
 
“We fully expect to see activity improve in the coming months as lenders look to increase their lending volumes in 2013 over 2012 levels.”

Richard Sexton, director of e.surv chartered surveyors, said: “January’s figures actually mask a much broader improvement in the mortgage market. The Funding for Lending scheme is easing the paralysis of the mortgage market.”