Mortgage lending up 15%

21 July 2010

Mortgage lending increased by 15% in June, according to data from the Council of Mortgage Lenders (CML). 

Gross lending, which includes lending to house buyers and those re-mortgaging, rose to £13.1 billion last month, up 15% on May’s figure. This is the biggest monthly figure so far this year.

In the second quarter of 2010 gross lending was an estimated £35 billion, up 17% from the first quarter. The annual rise is 7%.

The figures this morning prompted suggestions of improved economic growth. However, experts warn this rise is purely seasonal and cannot be sustained.

Upcoming public sector cuts, the increase in VAT to 20%, other tax rises and a potential freeze on wage increases, are all predicted to have a negative impact on the housing market.

Paul Samter, economist at CML, says: "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."

Jonathan Samuels, CEO of property finance specialists Drawbridge Finance, is also wary about the news.

"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. People who can secure mortgage finance will be calling all the shots," he says.

When details of public sector cuts are announced later in the year there should be a clearer idea of exactly how the housing market will be affected.

Adam Challis, head of research at Hamptons International, predicts a house price adjustment through the second half of the year, which will more than reverse the gains since January.

"We expect prices to end up 1% to 2% lower over the course of the year, before returning to moderate growth of 3% to 4% in 2011," says Challis.

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