Mortgage Lending Slumps!

by Mark Johnston

The end of the stamp duty at the end of March drove a sharp fall in mortgage lending in April, gross mortgage lending fell by 19% to £10.2 billion in April 2012, which means that mortgage lending has slumped to a 12 month low.

Recent data has shown that the number of loans to home buyers fell by 30% month on month.

The Council of Mortgage lenders (CML) figure was however higher than the £10 billion recorded for the same period last year but it was still down on September 2011 peak of £13.6 billion.

However, gross mortgage lending in May was an estimated £12.2 billion, a 24% increase on Aprils figure and thus taking this years gross lending so far to £55.7 billion.

With figures such as these the mortgage industry is widely expected to hit £130 billion in lending this year.

Bob Pannell, the Council of Mortgage Lenders (CML) chief economist, said “mortgage lending activity has been relatively buoyant in recent months, with stronger lending for house purchase underpinning the more upbeat lending picture”.

However the cross border nature of banking means thatUKbanks can not remain immune to what happens in the euro zone indefinitely. Many lenders have already indicated that they have less appetite to lend, therefore if the crisis continues, which it will, it will become even harder to get any wholesale funding.

Data has shown that the turmoil in the financial markets has increased the cost of funding mortgages by 40% since February 2012.

Some analysts believe the underlying picture is likely to be one of easing momentum in the housing market, but with the potential for a sharper downwards correction on bad news from the euro zone.

Richard Sexton, director of, the charted surveyors, said “the mortgage market has gone in to reverse. Borrowers are being hit hard by rate rises and tightening lending criteria as banks scramble to protect their balance sheets from the impact of Greece leaving the euro zone, which looks more inevitable by the day”.

The government and the Bank of England has recently announced a number of measures to counter the adverse effects from the euro zone crisis one such scheme is the ‘funding for lending’ .

David brown, commercial director of LSL property services said “if the banks funding for lending scheme is a success, banks could potentially increase their lending substantially in the coming months”.

Meanwhile, lending continues to seesaw, albeit against a broadly flat market. Unfortunately several high profile events including the Olympics could distort the market which means that the figures released in the autumn will provide a more accurate assessment of the current state of mortgage lending.

Martijn Van Der Heijden, the Council of Mortgage Lenders (CML) chairman believe that it is now time for the £1.2 trillion UK mortgage lending industry to pull together, focus on quality and innovate for the long term health of the UK housing market.

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