Gross mortgage lending falls by £10.5bn

Robyn Hall

March 20, 2013

Despite the £0.9bn drop in lending, February saw a 1% increase compared to the same month last year which stood at £10.4bn.

CML chief economist Bob Pannell said: “There continue to be signs of improvement in activity and sentiment in the housing and mortgage market sector despite headwinds from a challenging economic backdrop. With relatively strong house purchase numbers and subdued remortgage activity the underlying position does not appear to have changed much over recent months.

“Further policy intervention in the housing market is expected in today’s Budget and if so, it is important that any policy objectives are clearly articulated.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Mortgage lending numbers for February are disappointing showing a decline on the previous month which is blamed on seasonal factors.

“However on the ground the picture has been more positive than the official figures suggest. January and February have both been incredibly busy months for mortgage brokers with no sign yet of a let up.”

Harris said estate agents have also reported a busy start to the year although stock levels still remain low.

He added: “There are signs that Funding for Lending is working with lower mortgage rates across the loan to value bands giving us some of the cheapest mortgages ever seen.

“This is increasingly important because of the other issues in the economy and will be essential if housing purchase activity is to be robust this year.”

Richard Sexton, director of e.surv chartered surveyors, was not surprised that the latest estimate was one of decline rather than growth.

He said: “Purchasing property remains a bucket list dream for first-time buyers. Their personal finances are under siege from record low savings rates, punitively high inflation and rising costs of living. Mortgage rates are low, but deposit requirements are still high and criteria are strict.

“Despite improving market sentiment, tight credit conditions are having a debilitating effect on the mortgage market. They have damaged lending levels, particularly to first-time buyers, and impaired banks’ ability to increase lending with any real significance.”

Sexton said pessimism about the economic future is plaguing the mortgage market and so he hoped the Chancellor had anticipated this continued trend and was planning to help the sector in today’s Budget.

Harris too was looking to the Budget to inject some confidence back into the housing market.

He said: “We await with interest the Budget later today and hope to see some support for the housing market, particularly for first-time buyers. We could do without further tinkering to Stamp Duty Land Tax and an end to talk of a Mansion Tax.”

Paul Hunt, managing director of Phoebus Software, said: “It’s encouraging to see a small annual rise in gross mortgage lending but an 8% decrease since last month confirms that conditions for lenders and borrowers remain challenging and we are yet to see sustained improvement.

“The Funding for Lending scheme has certainly helped make borrowing more accessible, along with a real commitment from lenders to support first time buyers in particular which has had a big impact at the bottom of the ladder.”

Duncan Kreeger, director at peer-to-peer lender West One Loans, added: “The CML might hope this news gets drowned out in all the white noise of Budget day.

“Traditional lenders simply aren’t lending to the credit-worthy businesses and homeowners who are in desperate need of finance.

“A few months ago the CML was confidently predicting £156 billion in gross lending this year.

“Even at the time that looked hugely optimistic. But today’s admission is another level of failure. This puts the last twelve months of mainstream lending almost 10% behind that £156 billion target.

“Even compared to last year’s miserable February it’s bleak. An unprecedented subsidy for high street lenders, in the form of Funding for Lending, only prodded them towards 1% more gross lending in a year.

“Today, more than any other day, that failure will sting. The Chancellor might have some surprises up his sleeve but without a doubt he’s getting shorter and shorter of cash to dish out.

“Any surprises are likely to be the sort of presents you usually get in crackers. Alternative finance, without subsidy, is increasingly filling the gap left by the high street – with gross bridging Lending up 10% just in the last quarter.”

Sign up to our daily email