June’s Mortgage Lending.

by Mark Johnston

Junes mortgage lending.

Mortgage lending has experienced something of a see-saw pattern over recent months, according to many experts in the field.

Recent figures have shown that net mortgage lending grew by 0.9% in months leading up to June. However, it now appears that mortgage approvals have slipped to their lowest levels in at least 15 years.

Weaker mortgage lending in June does appear to point to a more subdued tone for the housing market, in line with that for the wider economy.

In the aftermath of the financial crisis, lending has slowed significantly and this slow down has intensified further in recent months. Although it does appear that paying off loans or overdrafts and also building up deposits is the current consumer’s ambition.

David Dooks, the British Bankers Association’s (BBA) statistic director, suggested that “public holidays combined with the wet weather have put a dampener on mortgage approvals in June and demand for unsecured household borrowing was also low”.

Data has shown that just 51,610 mortgages worth a total of £6.5 billion were approved in June, meaning that house purchase approvals were 20.5% lower than they were a year ago. In May 2012, mortgage approvals totalled 59,923.

Within these figures, 26.269 mortgages worth £4.2 billion were approved for new house purchases and 14,001 worth £1.9 billion were re-mortgages.

The Council of Mortgage Lenders (CML) estimates that gross mortgage lending in June totalled 311.9 billion, thus showing a 5% fall from May. Lending in the first half of this year totalled around £67.9 billion.

These figures can differ to one another as historically the difference between gross lending and capital repayment produce significant increases in net lending each month.

Despite these falls in mortgage approvals, the average price of a house purchase approval was approximately £166,600, which is a rise on May’s figure of just £162,700.

In light of poor lending on a whole the Bank of England and the treasury has launched the ‘funding for lending’ scheme, this is to help guard against a contraction in lending over at least the next 18 months.

The Council of Mortgage Lenders (CML) chief economist, Bob Pannell, commented that “the recent launch of the ‘funding for lending’ scheme comes at a time when credibility in further quantative easing has started to wane”.

Data analysts at Barclays are of the opinion that “although today’s data reinforces the case for such initiatives, as the mortgage market remains depressed and lending has fallen, we think this particular policy is likely to have limited effect on the macro economy”.

Howard Archer, of IHS Global Insight, suggests “while housing market activity may eventually be lifted by more mortgages being granted at decent rates under the ‘funding for lending’ scheme, this is unlikely to be a major factor in the near term at least”.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said “we expect a drop off in lending in the second half of the year due to the Olympics, the continuing euro zone crisis and weak consumer confidence”.



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