Tweet
Mortgage lending increased by almost 7% in October but remains well below last year's level, figures showed today.
The Council of Mortgage Lenders (CML) said gross mortgage lending totalled £18.7bn in October, up from September's record low of £17.4bn.
Despite interest rate cuts in October and November, which have brought the Bank of England base rate down to 3% from 5%, the market was still stymied by a lack of mortgage funding, the CML said.
As a result, the gross lending figure, which does not take into account repayments and redemptions, remains the second lowest this year and is 44% lower than last October when lending totaled £33.4bn.
The CML's direct general, Michael Coogan, said the outlook for the mortgage market remained weak and more government action was needed to free up lending.
"Consumer confidence is now being affected by the worsening economic outlook. However, any recovery in lending is also being held back by the continuing shortage of mortgage funding," Coogan said.
"The government should therefore publish the delayed Crosby review as part of the forthcoming pre-budget report and announce concrete steps that will enable and encourage firms to increase mortgage loans."
Andrew Montlake, a partner at mortgage broker Cobalt Capital, said few people would take heart from the fact that lending was up month-on-month.
"You have a double whammy where consumer confidence is shot to bits by a rapidly weakening economy and the mainstream lenders are only accepting 'quality' applicants with big deposits," he said.
"I hate to say it, but it could be some time before things start to improve."
Yesterday, the National Association of Estate Agents also reported a slight bounce in the housing market in October, saying its members had sold an average of seven properties each during the month, compared with six in September.
The percentage of buyers entering the market had also increased, it said, but the number of house hunters on agents' books was down 7% from the previous month.
One of the problems buyers face is the continued shortage of cheap deals. Although many lenders cut their standard variable rates (SVRs) in line with the base rate reduction after pressure from the government, they have withdrawn some of their most competitive deals and continue to demand large deposits.
Financial information firm Moneyfacts said today that despite the 2% fall in the base rate since the start of October, rising margins meant the average rate on a new two-year tracker mortgage had only fallen from 6.29% to 5.11%.
At the same time, the maximum loan-to-value on tracker deals had been slashed from 90% to 75%.
guardian.co.uk © Guardian News & Media Limited 2008 | Use of this content is subject to our Terms & Conditions | More Feeds
More...
