Mortgage lending improves in June but CML cautious

| August 11, 2010 | 0 Comments
Mortgage lending improves in June but CML cautious

Despite the doom and gloom surrounding the housing market currently, there is some positive news from the Council of Mortgage Lenders (CML).

According to the CML, 52,000 new loans were granted to home buyers in June - 19% higher than in May and up 14% on June 2009.

CML economist Paul Samter points out that this is the 12th month in a row in which lending has been higher than its year-earlier levels.

However, while mortgage lending is improving, it is still way below levels experienced prior to the credit crunch.

The Council is, however, cautious about the outlook in the short-term and expects “house purchase activity to be muted”.

“Both consumer demand and lending capacity remain distinctly difficult to call, especially in the light of the government’s austerity measures and their possible impact,” said Mr Samter.

Meanwhile, despite the historically low interest rate environment, the CML said remortgaging increased, albeit, only marginally.

There were 27,000 loans for remortgage, worth £3.4 billion, higher than the 26,000, worth £3.2 billion in May.

Since the credit crunch three years ago, lending criteria has tightened and first-time buyers, in particular, have struggling to get a foot on the property ladder, unless they have a large deposit.

First-time buyers (FTBs) now have to put down an average deposit of 24% but the CML said FTBs took 28% more mortgages in the first six months of 2010 than they did in the same period a year ago.

Yesterday, the latest survey by the Royal Institution of Chartered Surveyors (Rics) found that a decline in buyer demand is resulting in a fall in house prices.

Recent reports have highlighted that a high level of stock but a shortage of buyers will ultimately drive down house prices.

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