Gross Mortgage Lending Plunges!

by Mark Johnston

Gross mortgage lending fell to an estimated £10.2 billion in April 2012 compared with £12.6 billion in March 2012. This is the lowest figure since April 2011 when lending was £10 billion.

The Council of Mortgage Lenders said that the underlying picture appeared to be one of “easing momentum” in the housing market.

The Council of Mortgage Lenders chief economist, Bob Pannell, stated that “given the unfavourable economic and financial backdrop, it is hard to believe the stronger levels of house buying activity seen in recent months would be maintained”.

According to industry data mortgage lending slumped 19% to its lowest level for a year; this was partly due to many buyers bringing forward their property purchases in order to benefit from the stamp duty holiday which ended in March.

Howard Archer, chief UK and European economist at HIS Global Insight, added “it certainly appears that an already muted market has softened since the ending of the stamp duty concession in March, which clearly bought some activity forward”.

Net mortgage lending is 90% lower than it was pre 2008 and currently borrowers have to cross painfully high thresholds to obtain high loan to value (LTV) mortgages.

David Whittaker, managing director of buy to let specialist Mortgages for Business, has predicted that monthly lending would continue to fluctuate between growth and decline over the coming months.

Some experts believe that if the euro zone crisis takes another turn for the worse then mortgage lending, especially to first time buyers, could enter a state of ‘near paralysis’.

Mark Harris, chief executive of mortgage broker SPF Private Clients agreed with other experts and said “there is now an even bigger problem on the horizon in the shape of the euro zone crisis. The cross border nature of banking means UK banks can not remain immune to what happens in the euro zone.

Duncan Kreeger, chairman of specialist lender West One Loans, said “there is a big funding gap between supply and demand. Underlying demand is actually very healthy, but lenders do not have the capacity to meet it”.

Financial markets are unsettled and this is therefore pushing up funding costs, with this on their minds lenders have currently indicated that they have less appetite to lend. Mortgage rates have already started to edge upwards and many expect this to continue.

Recent figures have shown that the rise in mortgage rates, slowing income growth and persistently high inflation have now triggered a sharp fall in consumer spending, which could further knock the UK’s recovery off course.

Tim Moore, a senior economist, said “households saw the amount of cash left in their pockets fall at the fastest pace so far in 2012. With mortgage holders feeling the greatest squeeze”.

A recent report showed that many consumers are more than £100 a year worse off then the same time last year.

A monthly consumer health report by financial data providers Markit, showed that consumers on a whole remained ‘gloomy’ about the UK’s prospects, especially with prices rising and household incomes remaining stagnate.



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