Gross mortgage lending declined to an estimated £23.8 billion in June, down 3 percent from May and 32 percent from June 2007, according to the Council of Mortgage Lenders.
The decline between the first and second quarter was a marginal one percent. However, an increase would typically be expected in spring. The year-on-year decline has gathered pace in recent months; lending in the first quarter of 2008 was down 11 percent on 12 months earlier, while the second quarter was down 21 percent.
CML director general, Michael Coogan, said: “Market activity during a traditionally a busy time of year for mortgages has been muted by funding shortages and, more recently, dampened consumer demand.
“While by historic comparisons we still have had a good level of gross lending, new net lending has been constrained in 2008 and this picture will continue for the rest of this year.
“Government efforts to help housing associations purchase new-build properties and borrowers to save for a deposit are welcome, but are likely to have only a marginal impact on the housing market.
The recent reduction in short-term fixed-rate mortgage costs is a small bit of welcome news for hard-pressed households facing significant pressures on their finances from the higher cost of food and fuel, in particular.
“However, 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.”
Recent news of reduced mortgage rates from some major lenders and indications that more may follow has been welcomed by Savills Research.
Yolande Barnes, director of Savills Research, said: “Swap rates hit an extreme high in June and, as none of the base rate cuts had translated into lower mortgage rates, lender margins have been at an all time high. In that context, these falls are long overdue, and definitely a welcome step in the right direction and are great news for existing and potential homeowners.
“I don't expect to see base rates come down again this year – though to an extent this now appears academic to the mortgage market - and the credit crisis is a long way from being over. However, until confidence returns to lenders and they start cutting rates on a regular basis we won't get to that point”.
Melanie Bien, director of independent mortgage broker Savills Private Finance comments: “In recent months lenders have simply not demonstrated an appetite to lend and signs that some of the biggest ones - Abbey, Halifax, Nationwide, Lloyds TSB - are finally cutting some rates is very encouraging.”
