Mortgage Lending Continued To Fall During August
The latest figures from the Council of Mortgage Lenders showed Mortgage lending continued its downward spiral in August
The total value of new lending was £21.8bn, down by 12% from July and 36% lower than in August last year.
The CML said it was the lowest monthly figure since April 2005 and the lowest August figure since 2002.
It blamed the continued fall in mortgage lending on “exceptionally low housing market turnover.”
The CML’s director general, Michael Coogan, warned that lending would remain low in the months ahead.
“These figures reflect the heightened uncertainty for both lenders and consumers in the mortgage market at present,” he said.
“Lenders are uncertain about future sources of funding and the cost of funding, while consumers are unsure about how much further and for how long house prices will continue to decline.”
Gloomy prospects
There seems little doubt that sales and prices will fall further in the next few months.
Sales are already down by a half over the past year, while mortgages approved but not yet lent have fallen by 71% on the levels of a year ago.
This suggests that actual sales may soon drop even more.
Andrew Montlake, of mortgage brokers Cobalt Capital, said the latest CML figures were grim, but not surprising.
“They are a reflection of the near standstill the property market now finds itself in,” he said.
“In some areas, you could count the number of property transactions in August on one hand.
“And although August is always a fairly quiet month, it could be a few months before things start to pick up given the events of the past few days,” he added.
All surveys of house prices now suggest that on average they are lower than they were a year ago, with the most widely followed surveys published by the Nationwide and Halifax both showing a drop in prices of 11% during the past 12 months.
The latest crises in the financial markets, and the sudden takeover of the Halifax bank - the UK’s biggest mortgage lender - may make more people less confident about borrowing, which could extend the current sharp downturn in the property market.
Mortgage Lending Slump Continues Throughout July
The slump in mortgage lending continued throughout July, according to the latest figures from the Council of Mortgage Lenders (CML).
Total lending stood at £24.8bn, up slightly by 5% from June, but still 27% lower than the same period last year.
Lending to homeowners has slumped dramatically in 2008, because the credit crunch has dried up the supply of funds available to banks.
House sales have dropped by 50% this year and will probably fall further.
“While there was a small month-on-month increase in activity, it represented a notable decline from a year ago,” said Bob Pannell of the CML.
“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,” he added.
The bulk of mortgage lending this year has been to people who are not, in fact, moving house.
Previous figures from the CML have shown that so far in 2008, only 29% of mortgage lending has been to house buyers.
The rest has been to people staying put but moving to new mortgage deals, such as former customers of the Northern Rock, or to people borrowing extra sums against the value of their homes. A marked contrast to the situation year ago.
In the course of 2007, lending to home buyers was a much higher proportion of total mortgage lending, at 43%.
The slump in home buying in the past 12 months is highlighted by the fact that in June this year, loans for home buyers were less than half the number seen in June 2007.
“Even though the base rate has come down by 0.75% since August 2007, those without higher deposits have seen little benefit with many first time buyers effectively shut out of the market,” said Oliver Gilmartin of the Royal Institution of Chartered Surveyors (Rics).
“Despite the prospect of further interest rate cuts as the economy slows sharply into 2009, tighter lending standards look set to stay,” he warned.
Lenders are continuing to shave the interest rates on their mortgage deals, as the cost of funding has come down in the past month or so.
“In the past few weeks, some lenders have returned to the market,” said Andrew Montlake of mortgage brokers Cobalt Capital.
“The Abbey, Nationwide and HBOS have been having a bit of a battle to get more business in,” he added.
Tomorrow the Abbey is cutting the rates it charges on its two-, three- and five-year mortgage deals, for borrowers who can put down a 25% or 30% deposit.
But these are aimed at customers of other lenders who are seeking a better deal, not at people who are moving house or trying to buy a home for the first time.
“They only have two fixed-rate deals for people with deposits of less than 25%,” said Aaron Strutt of mortgage brokers Chase de Vere.
“Their most competitive deals are for people with at least 25% to put down,” he added.
