Mortgage lending down four per cent year-on-year, says CML

The Council of Mortgage Lenders (CML) reports that gross mortgage lending dipped slightly in August, down from £12.7 billion in July to £12.6 billion in August.

This is a four per cent drop from 12 months ago when in August 2011 mortgage lending was £13.1 billion.

The CML says that the mortgage market is flat like the wider economy.

Howard Archer, Chief UK & European Economist at IHS Global Insight said: "The decline in house prices should be limited by the resilience of the labour market and ongoing low interest rates."

Analysts believe the Bank of England’s Funding for Lending Scheme (FLS) is beginning to have an impact in producing better and cheaper products and is encouraging people to proceed with property purchases.

The scheme offers banks the chance to borrow at lower rates as long as they pass the funds onto consumers at lower rates.

The CML also hopes that the NewBuy scheme, which aims to match newly built properties in England with buyers who do not have a large deposit, will provide impetus to the property market.

CML chief economist Bob Pannell said: "House purchase activity continues to be a little above year-earlier levels, but the housing numbers are far from strong.

"We expect to see stronger take-up of NewBuy over the coming months, helped by a concerted marketing effort by builders and the recently launched Funding for Lending Scheme, which has prompted reductions in NewBuy mortgage rates. Both factors should stimulate buyer interest.”

Bob Pannell believes it is too early to make a judgement on the FLS. He said: "The Funding for Lending Scheme is a bold move that has the potential to greatly influence the course of the housing market over the next year or so.

"While not a panacea for all housing market problems, the scheme does offer the potential to improve the lending environment. Unfortunately, it will be towards year-end before any initial assessment of its impact can be reached."

Despite the possible green shoots of recovery promised by the FLS, mortgage approvals and activity remain well below normal levels.

Mr Archer said: “The CML mortgage data indicates that housing market activity remains in the doldrums and reinforces our belief that house prices are likely to trend modestly lower over the latter months of 2012 and very possibly beyond. Specifically, we expect house prices to fall by at least 3% from current levels.”

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