Latest figures show mortgage lending still subdued

Financial News

After the results of the e.serv survey earlier this week it is no surprise that the latest figures from the Council of Mortgage Lenders (CML) confirm that mortgage lending is still subdued, if stable.

For both home purchases and remortgages gross mortgage lending fell, on a month on month basis, by 1% in July to £12.6 billion pounds. The latest figures represent a fall of some 6% compared to this time last year.

The message from the CML is that the housing market is “subdued but stable”. Their chief economist, Bob Pannell, said: “Underlying house purchase activity may drift lower over the coming months.”

He continued: “UK economic prospects have deteriorated as a result of weaknesses in some of the major economies and renewed stresses in the Eurozone area associated with the sustainability of government finances.

“As a result, UK interest rates look like staying lower for longer.”

Mixed messages

The housing market is experiencing mixed messages at the current time.

On the one hand the Bank of England is signalling that rates will stay low for longer than expected, indeed the latest minutes show that all nine member of the Monetary Policy Committee (MPC) voted to keep rates unchanged last month. Furthermore the recent crisis in the Eurozone countries has also helped to reduce long term fixed rate mortgages, as ‘swap’ rates, which help determine the price of fixed rate mortgages have fallen.

However, economic uncertainty and continuing tight lending criteria, despite more mortgage deals being available for people with smaller deposits, seem to be keeping the market subdued.

The negative factors of economic uncertainty and tight lending criteria seem to be having greater influence on the housing market at the current time, offsetting the benefits of lower interest rates, which are of course only a benefit if you currently have a variable rate or tracker mortgage or can pass the seemingly tight criteria of mortgage lenders.