Mortgage lending at new lows in June

Published on Friday 18 July 2008 21:26

MORTGAGE lending fell to a two-year low last month, new figures out yesterday revealed. The Council of Mortgage Lenders (CML) reported that its members – accounting for 98 per cent of UK lenders – advanced £23.8 billion of loans in June, 3 per cent less than in May and a third down on last year.

The fall in lending between the first three months of the year and the second quarter was just 1 per cent, suggesting the pace of decline had slowed, but that impression is misleading "Market activity during a traditionally busy time of year for mortgages has been muted by funding shortages and, more recently, dampened consumer demand," said Michael Coogan, director-general of the CML.

The year-on-year decline has gathered pace, with the second quarter down 21 per cent on the same period last year, compared with a 11 per cent year-on-year fall in the first quarter.

Coogan said that market conditions would mean lending remains constrained for the remainder of 2008, despite evidence of a fall in short-term fixed-repayment rates. "Borrowers on tight budgets will have to plan ahead to manage higher mortgage payments than they have been used to. Speak to your lender early, remains the advice for anyone struggling to pay."

Some mortgage rates have fallen in the last two weeks, with Nationwide, Abbey, Woolwich and Halifax (twice) reducing the cost of some mortgages. However the reductions primarily benefit borrowers with a 25 per cent deposit.

"I would hope to see other lenders follow suit, bringing some much-needed competition to a market that has been depressingly bereft of vying lenders," said Drew Wotherspoon, head of communications at broker John Charcol.