The Council of Mortgage Lenders estimates that gross mortgage lending in September was £11.6 billion. This is 10% lower than August’s gross lending figure of £12.9 billion and a 15% fall from £13.7 billion in September 2011.
Gross lending for the third quarter of 2012 was therefore an estimated £37.3 billion, an 8% increase from the second quarter of this year (£34.5 billion) but a 5% decrease from the third quarter of 2011 (£39.3 billion).
In today’s market commentary, CML chief economist Bob Pannell observes:
“There have been hints of demand softening over recent months, but monthly patterns may have been distorted by the Olympics. House purchase demand failed to lift significantly in the third quarter, despite much better mortgage availability. Remortgage activity continued to languish, in contrast to relatively strong levels a year ago.”
Richard Sexton, director of e.surv chartered surveyors, commented:
“The mortgage market is at a low ebb. High loan-to-value lending accounted for less than one in ten of all house purchase loans in September, and there were 10% fewer home loans than this time last year. Funding for Lending has yet to jumpstart first-time buyer lending – historically the beating heart of the housing market. Even though the scheme has flooded banks’ balance sheets with cheaper funds, it hasn’t been enough to offset chronic macroeconomic constraints on lending. Banks are required to hold ludicrously high capital adequacy buffers, which is preventing them from increasing lending with any conviction. And the lack of confidence the money markets have in UK economic growth is leaching away mortgage funds from our banks. Lenders have kept credit scoring tight as a result, which has proved a big stumbling block, particularly for first time buyer lending.
It’s early days though. The effects of Funding for Lending have yet to kick-in. Think of it as nurofen for a headache. The mortgage market has taken its medicine, but once you take a pill you don’t always feel immediate relief, it can take some time to work. The same is true of FLS. Lenders have reported a record increase in quarterly mortgage credit, thanks mainly to FLS. The hope is that this will begin translate into more high LTV lending towards Christmas, though lenders may choose simply to stick with lower LTV products and increase volume in this area. FLS provides an insurance policy to lenders, and the market must hope it will imbue banks with enough confidence to begin relaxing tight lending criteria.”