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Mortgage lending sees slight upturn

Wednesday, 20 August 2008 9:44 AM

Gross mortgage lending in the UK economy showed signs of a slight recovery during July, according to the latest figures from the Council of Mortgage Lenders (CML).

The total lent during the month stood at an estimated £24.8 billion in July. This was up five per cent from the figure recorded for June.

However, despite the month-on-month recovery, the July figure is still 27 per cent below that recorded by the CML a year ago.

Commenting on the findings Bob Pannell, CML head of research, said: "While there was a small month-on-month increase in activity, it represented a notable decline from a year ago.

"This continues the weaker picture seen in June and points towards the more subdued levels of lending we are likely to see in the second half of 2008."

CML members are banks, building societies and other lenders who together undertake around 98 per cent of all residential mortgage lending in the UK.

There are presently some 11.74 million mortgages in the UK, with loans worth over £1.2 trillion.

Research out today from Datamonitor points to the dearth of mortgage lending to continue until 2010.

Commenting on CML gross mortgage lending data, Oliver Gilmartin, Royal Institution of Chartered Surveyors (Rics) senior economist said: "The recent improvement in the monthly gross lending could offer some encouragement in what are typically slower summer months.

"While banks are still in the process of repairing their balance sheets and as the securitisation markets remain effectively closed, mortgage lending is unlikely to recover in any meaningful way," he added.

"Even though the base rate has come down by 0.75 percent since August 2007, those without higher deposits have seen little benefit with many first time buyers effectively shut out of the market.

"Despite the prospect of further interest rate cuts as the economy slows sharply into 2009, tighter lending standards look set to stay."

The Bank of England has maintained interest rates at five per cent for the past four months.

Chris O'Toole

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