Mortgage lending continues but at very low levels
The slump in mortgage lending continued in July, according to the latest figures from the Council of Mortgage Lenders (CML).
Total lending stood at £24.8bn, up by 5% from June, but still 27% lower than a year ago.
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.
Fewer home buyers
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.
The situation was very different a 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.