vallierojas: Mortgage lending up in June

Sunday, August 14, 2011

Mortgage lending up in June

The Council of Mortgage Lenders reports a 22% increase in mortgages for house purchases since May, but the figure remains 11% lower than a year ago

The mortgage market picked up in June as the number of first-time buyers and home movers increased, figures from the Council of Mortgage Lenders (CML) showed. However, the number of home loans remained low by historical standards.

The CML figures show 46,700 mortgages were advanced for house purchases during the month ? an increase of 22% on May's figure but down 11% year-on-year. The value of the loans also increased over the month from �5.9bn to �6.7bn.

Of these loans, 18,100 were made to first-time buyers. This figure was up 24% on May but was 8% lower than June last year. Home movers accounted for 28,600 loans ? up from 23,800 in May, but down from 32,800 in June 2010.

The figures took the number of mortgages advanced for house purchase in the second quarter of the year to 122,000, compared with 97,200 in the first quarter and 138,300 in the same period last year.

Remortgaging remained unchanged over the month, with 30,700 loans worth �3.8bn advanced to borrowers. However, this figure is up 1% by volume and 9% by value on the same month last year ? perhaps as a result of some good mortgage deals and borrowers' fears that an interest rate rise might be on its way.

The CML's director general, Paul Smee, said: "Whilst there are clearly financial uncertainties ahead, it is encouraging to see more house buyers surfacing at the start of summer.

"Recent increases in Bank of England approvals figures also show that more completions are expected in July, so the more encouraging numbers may persist for a while."

However, Howard Archer, chief UK economist at IHS Global Insight, pointed out that June is normally a strong month for homebuying and the figures remained muted compared to long-term trends.

"While there are signs that housing market activity has edged up from its lows recently, it remains very low compared to long-term norms and we see no reason to change our view that house prices are likely to fall by around 5% overall from current levels measure by mid-2012 in the face of persistent troublesome economic fundamentals."

He added: "Indeed, the current sell-offs in financial markets and growing fears of a renewed serious global economic downturn are unlikely to do much for consumer confidence and willingness to commit to buying a house in the near term."

For those who are still confident enough to take out a mortgage, recent days have brought a flurry of cheap deals, with Moneyfacts reporting that for the first time in 13 years the average cost of a five-year fixed-rate loan has fallen below 5%.

Nationwide building society has cut the cost of its two- and three-year fixed-rate mortgages, with all two-year deals reduced by 0.25% and 0.5% taken off some of its three-year deals.

The society's two-year fixed-rates now start at 2.64%, while three-year deals start at 2.89%. But to get those rates customers must pay a �900 product fee.

Hilary Osborne

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