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Friday 29th of May 2009
March 2, 2009

New mortgage lending holds steady in January


by Gill Montia
New mortgage lending holds steady in January

Latest figures from the Bank of England show mortgage lending volumes for house purchases in January falling in line with a six month average of 31,000.

However, net mortgage lending (gross lending with repayments and redemptions stripped out) rose by £690 million during the month, compared with £1.794 billion in December.

The data suggests that the new mortgage lending volumes have bottomed out at less than half the level seen a year ago.

In the past fortnight a rise in new buyer inquiries has been reported by both the Royal Institution of Chartered Surveyors and property website, Rightmove, indicating that confidence is returning to the market.

However, a turnaround in the UK property market will only be determined by improvements in mortgage funding, which remains extremely tight.

Bargain hunters are certainly about but lenders remain cautious and careful of their loan-to-value ratios (LTVs).

In particular, the 90% LTV mortgage has virtually disappeared as lenders fear mounting job losses, further house price falls and a rise in negative equity.

Mortgage providers are looking to the Government to reverse the decline and continue to press for Treasury guarantees for the mortgage-backed securities that have lost favour with investors.

Last week, Northern Rock made a return to new mortgage lending, making £14 billion available over the next two years. In addition, the state-owned bank will offer loans of up to 90% of a property’s value.

RBS and Lloyds Banking Group are also set to increase loans to homeowners, in exchange for participating in the Government’s Asset Protection Scheme.

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