The Council of Mortgage Lenders revealed today that lending for house purchase in July was £7.3bn. Not a lot in other words.
Remortgage was just £4bn.
The rate at which banks lent in the first half of the year if simply repeated in the second half, will see gross lending hit just £136bn in 2011 – no change from 2010 and shy of the CML’s £140bn forecast.
And yet lenders are slashing rates weekly – normally a sign that they wish to entice customers and lend more.
So how are the two compatible?
If you look at the lending done in the first half of the year Santander reported a 21% drop in gross lending; Barclays reported £7.6bn in gross mortgage lending for the first half of 2011, down on the £8.5bn it did in the first six months of 2010; and Northern Rock reported gross mortgage lending of £1.5bn, down 25% from the £2bn reported in the first half of 2011.
HSBC meanwhile reported gross mortgage advances of £ 6.7bn, up 35% from £4.9bn in H1 2010.
Bonfire of the mortgage rates is not about doing more lending then. It’s about maintaining market share and competing with the direct channel. Why is that important?
Brokers say lender margins on residential mortgages are good at the moment, there’s money to be made if you have money to lend. That is crucial for lenders still servicing vast back books of mortgages on Standard Variable Rate making a loss.
Maintaining market share of new lending makes up for some of that loss.
Not such great news for lenders but it does present some opportunity for brokers.
The Chancellor, George Osborne, has just signalled he is not averse to the Bank of England starting another round of quantitative easing (printing money) in the autumn in an attempt to boost economic growth.
If we go down that road then it is unlikely the Bank will raise the base rate any time soon.
That likelihood is priced into swap markets and allows lenders to drop their mortgage rates correspondingly.
It may be a sticky housing market with low transaction levels and gross lending struggling around the £11bn mark each month but people want to move and low mortgage rates mean more people can afford it.
It’s up to you to pick up the phone and tell them that.
