By Brian Murphy, head of lending at Mortgage Advice Bureau
The most recent CML’s gross lending figures for September paint a mixed picture, with month-on-month lending falling 10% short of the £12.9bn recorded in August while the total Q3 figures were actually up 8% on Q2 at £37.3bn.
In contrast, looking at the monthly figures, MAB’s September National Mortgage Index found mortgage applications increased last month, up 1.9% from August. This was boosted by strong remortgage activity which saw application growth of 12% against each of the two months before, and meaning that activity was 1.1% higher than the previous year.
The difference in the two sets of figures comes about because of the lag between applications being sent in and completing – even in a quieter mortgage market.
As such the CML’s findings showing there was a dip in gross lending in September are based on completion figures, many of which were applications in the month before.
MAB’s August Index reported a dip in application levels as a result of the seasonal easing of activity (and much talked about Olympic effect), so the two sets of data do show some correlation.
Thus, if the sequence continues, we would expect to see the CML gross mortgage lending for October showing a slight increase. Anecdotal figures from our brokers show another month of growth in activity levels for October and this is likely to be reflected in the CML’s figures for November.
While activity is now moving in the right direction, we are still not seeing substantial month-on-month growth in applications and completions.
Despite some initial criticism we feel that the Government’s Funding for Lending scheme has contributed to the recent improvement; the access to cheaper funding has encouraged lenders to cut rates, leading to an increase in the number of competitive products available across the market as a whole.
However, while some lenders have re-engaged with the higher loan to value sector this area requires further additional support before the market can be said to have steadied and housing transactions see a material increase.
We need to see further competition among higher LTV products, and for lenders to pass on some of those reduced funding costs this most price sensitive market sector.