Mortgage Lending May 2012

by Mark Johnston

The euro zone crisis and the end of the stamp duty holiday drove a sharp fall in mortgage lending in April 2012. The fall was an expected consequence of buyers rushing through their purchases before the exemption ended at the end of March.

The Council of Mortgage Lenders (CML) reported a 19% fall in gross mortgage lending to £10.2 billion from £12.6 billion in March 2012, although this is 2% higher when compared with lending in April 2011.

Recent data has shown that the number of loans to home buyers fell by 30% month on month in April to 36,000 loans worth £5.3 billion and also a total of 12,600 loans worth £1.5 billion were advanced to first time buyers, which is around half the number recorded in the previous month.

Figures have also shown a significant drop of 15% month on month in mortgage advances to home owners, although they were up a modest 3% year on year at 23,400.

Mark Harris, chief executive of mortgage broker SPF private clients, said of all these particular figures that “April’s figures were expected to go off a cliff after the end of the stamp duty holiday and they did not disappoint. It may be some time before there is any material up lift in mortgage activity”.

Worryingly though to some experts, even re-mortgage numbers have fallen 12% in March and this was 4% lower than in April last year.

Due to rising wholesale lending costs as a result of the euro zone crisis, home buyers and borrowers looking for a new mortgage have seen another steep rise in the cost of the ‘best’ deals.

Over just a few weeks both top fixed and tracker rates have leapt again, as banks and building societies squeeze even those borrowers with big deposits.

Analysts have found that the best mortgage rates at 75% loan to value (LTV) ratio have risen across the board during May and early June, having already climbed substantially from the deals on offer in the early spring.

Bob Pannell, the Council of Mortgage Lenders (CML) chief economist, suggests that the “euro zone crisis developments are highly uncertain and have the potential to undermineUKeconomic prospects and conditions in our housing and mortgage markets”.

Howard Archer of IHS Global Insight also added that “worries over the situation in the euro zone and how this could hit the UK economy may well also lead to increased caution over buying a home”.

The director general of the Council of Mortgage Lenders (CML), Paul Smee, commented that despite a fall in lending “our recent research highlights that over 80% of people still aspire to eventually own their own homes and therefore long term demand clearly still exists”.

In conclusion then, while the decline in Aprils lending was expected, the overall picture is still particularly gloomy. Many industry experts have suggested that a sustained recovery within the housing market is still a long way off.



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