Lending set to fall to lowest for decade, warns CML

Mortgage activity plummeted in June, says the Mortgage Advice Bureau.

The number of mortgage applications for house purchase fell by 19.4% on May’s figures, while remortgage applications tumbled by 30.5%.

MAB only releases data to do with applications, not approvals – however, approvals data from the Council of Mortgage Lenders yesterday confirms the picture.

The CML estimates that gross mortgage lending in June totalled £11.9bn, a 5% fall both from the previous month (£12.5bn) and from June 2011 (£12.6bn).

If the estimate is correct, it will have been the weakest June for a decade.  
 
Lending in the first half of this year totalled £67.9bn. Despite June’s drop, this is 7% higher than the first six months of 2011 (£63.7bn).

However, June’s fall comes with a market activity report from e-surv, part of LSL Property Services, which pointed to a near-record low for housing transactions in June.
 
CML chief economist Bob Pannell said: “Mortgage lending has experienced something of a see-saw pattern over recent months, largely reflecting the short-term spike and subsequent trough in house purchase activity associated with the ending of the Stamp Duty concession for first-time buyers in late March.

“Weaker mortgage lending in June points to a more subdued tone for the housing market in line with that for the wider economy.”

Using data from more than 500 brokers and 800 estate agents, the Mortgage Advice Bureau says average deposits on purchase applications has risen, reaching £66,512 in June from £56,167 – an increase of 18.4% – and rates have increased again, reaching 4.72% for the average two-year fixed rate mortgage – up from 4.27% in January.
 
Brian Murphy, head of lending at MAB, said: “The June figures are down for the year, having peaked just a month before, and we expect this volatility to continue for the rest of the year.

“This suggests fewer people are able to secure mortgage finance, especially at the bottom end of the market.
 
“If we are to see a return to growth we need to see more flexibility and more good-quality borrowers getting access to mortgage funding.

“The impact of moving back into recession has made borrowers nervous and the weather has also played its part, but more needs to be done to help kick-start the property market.
 
“There is much pent-up demand from borrowers, and while we believe the ‘funding for lending’ scheme could have a positive impact, it needs lenders to take up the proposal, and they will first want to be comfortable there is no stigma attached with doing so.”