Lending up 15% but'housing market going nowhere'

News Category: Industry News

News that mortgage lending went up 15% in June has failed to spread even a glimmer of happiness.

The Council of Mortgage Lenders said gross mortgage lending last month was £13.1bn, up from £11.4bn in May and a 7% increase from £12.2bn in June last year.

James Moss, director of Curzon Investment Property, said the figures were a sign that the housing market is going nowhere, whilst Brian Murphy, of the Mortgage Advice Bureau warned that mortgage lending levels this year will be worse than those of last.
 
Even the CML was not impressed. Its economist, Paul Samter, said: “It represents a seasonal pick-up and is higher than June last year, but is still indicative of low levels of activity.

“There are signs of house prices stabilising and more properties coming on to the market following the abolition of Home Information Packs. This may improve liquidity in the market, but transaction levels are subdued and likely to remain so while access to credit remains constrained.

“The FSA has outlined a clear direction of travel as part of its mortgage market review. The consultation paper on responsible lending increases the regulatory burden on lenders and could make it harder for borrowers to access credit.”

Jonathan Samuels, chief executive of Drawbridge Finance, also sounded gloomy. He said: “Mortgage lending may be up slightly, primarily due to seasonal factors, but in the short term, both the mortgage and property markets remain delicately poised.

“Ever-increasing supply and falling demand, driven largely by difficulties securing mortgage finance, could place downward pressure on prices in the months ahead. There is a considerable financing shortfall that is unlikely to be made up for some time yet.

“People who can secure mortgage finance will be calling all the shots.”

Brian Murphy, head of lending at the Mortgage Advice Bureau, also failed to raise a smile. He said: “Although the June figures show a healthy rise on the previous month, we can largely put this increase down to a normal seasonal uplift in housing market activity. More revealing is the levels of lending in the first half of 2010, which are roughly the same as 2009, but whereas in the second half of 2009 the market had a boost with the end of the Stamp Duty holiday incentivising people to jump in and buy, there is no such incentive for buyers in the second half of 2010.

“On the contrary, with looming public sector cuts, taxation rises, a freeze on wage increases and inflationary pressures, we are likely to see lending tail off during the second half of 2010, with buyers likely to take a wait-and-see approach. There’s every chance that mortgage lending this year will be below the level of lending in 2009.”

David Newnes, estate agency managing director of LSL, said: “We are still some way from being able to declare an improvement in the lending market. The level of lending in the second quarter of 2010 was just half the level of two years ago. The wider economic conditions are still challenging, and the impact of the recent austerity measures may well dampen mortgage lending in the short term.
 
“The long-term sustainable recovery of the housing market is dependent on lenders offering wannabe first-time buyers more attractive – and achievable – mortgage products.”
 
James Moss, of Curzon, said: “The overall vibe is one of subdued acceptance that the housing market is going nowhere fast. While lending is slowly improving, the full impact of the cuts won’t be felt for a while.

“This will have a double-pronged effect of putting thousands of jobless home owners at risk of losing their homes, but also offer the possibility that these homes may then be sold on at cheaper rates by banks.
 
“The real issue for housing is that giving councils veto rights on developments and scrapping targets is already leading to chaos, with thousands of homes cancelled by Nimby local authorities. If the supply remains constricted, homes will remain unaffordable, and with student debt rising, the next generation will have no hope of owning a house.”


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