Mortgage lending down 60%
The Council of Mortgage Lenders (CML) has reported that gross mortgage lending fell to an estimated £9.9 billion in February.
The figure represents a 15% decline on January’s total of £11.7 billion and is 60% below that of February 2008.
The CML points out that February is typically the weakest month for mortgage completions, however, the drop between January and February is normally between 3% and 4%.
February’s figure is also the lowest monthly gross lending total since 2001.
As the credit crisis continues and the wholesale money markets remain largely frozen, the Council’s director general, Michael Coogan, explains that retail savings are now the predominant source of funding for mortgages.
On this point Mr Coogan takes the Government to task, claiming that banks and building societies have seen savings ebb away to the Treasury-backed National Savings & Investments (NS&I).
He suggests that this flow has had a negative impact on banks’ ability to lend and describes the situation as “yet another example of fractured policy”.
Mr Coogan adds: “There are now fewer active lenders in the market, but the government wants them to lend more. At the same time, the Government’s own savings institution is sucking away the funds that would enable them to do so. Until funding improves, the capacity of lenders to lend will remain constrained.”
Earlier this month NS&I reported a 65% rise in new deposits during the final quarter of 2008.
According to the government-backed provider, the record inflow of funds is the result of the turbulence in the financial markets.
This observation is supported by NS&I’s interest rates, which are not generally regarded as outstanding.
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