Mortgage lending still increasing

The property market may slow down later this year, the CML warns

Mortgage lending continues to rise, according to the latest figures from the Council of Mortgage Lenders (CML).

Gross lending in July stood at £16bn, 26% higher than in June, though still more than a third lower than in July last year.

Mortgage lending, house sales and property prices have all picked up in the past few months after a dramatic slump caused by the banking crisis.

But the CML warned the housing market would slow down again later this year.

"The CML's July gross lending estimate of £16 billion is the highest level in nine months and consistent with the rise in house purchase approvals," said the CML's economist Paul Samter.

"We anticipate some seasonal slowing in lending volumes and housing transactions over the latter part of the year and the picture of a slow but more stable market to emerge," he added.

Less expensive loans?

Typically, would-be borrowers now have to put down an average deposit of 25% if they want to take out a mortgage.

Over the past month there had been no further increase in their appetite to lend at high loan-to-values Bank of England

The latest "Trends in Lending" report, from the Bank of England, said there had been little sign of this rationing of the home loan market easing up.

"In line with rising mortgage approvals, gross lending for house purchase has continued its recovery since the beginning of the year, but remortgaging activity remains very subdued," the Bank said in its August report.

"The major UK lenders reported that over the past month there had been no further increase in their appetite to lend at high loan-to-values (LTVs)," it added.

The Bank's report pointed out that 90% mortgages had become much more expensive, relative to 75% mortgages, than they were before the banking crisis started in 2007.

That was because of the increased risk of default associated with the larger LTV mortgages.

But the Bank said some lenders had indicated to it that if the risk of further house price falls eased off, they might make their 90% mortgages slightly less expensive compared to their 75% loans.

'Bounce-back'

The improvement in mortgage lending in July was due to the rise in house buying usually seen during the summer, the CML said.

But it warned against exaggerating the improvement.

It pointed out that lending in July was still at its lowest for that month since 2001 and far lower than the July average of £27bn recorded in the previous seven years.

"But the bounce-back in activity from the extreme weakness around the turn of the year, coinciding with a seasonal bounce, is limited in how far it can go against the current backdrop," said Mr Samter.

Andrew Montlake, of mortgage broker Coreco, said: "These latest figures support the general feeling that some parts of the lending market are slowly easing, particularly in the large mortgage loan sector.

"However, there is still a big squeeze in terms of availability and competitive mortgage rates in the wider market, despite buyer demand being strong," he added.