UK Property News and Information

MORTGAGE lending reached a 2010 high last month but housing market activity remains subdued and is likely to drop off again later this year, the Council of Mortgage Lenders (CML) said yesterday.

Total mortgage lending jumped 15 per cent to £13.1 billion in June, a 7 per cent increase from the same month last year, according to new data from the CML. Lending in the second quarter of 2010 reached an estimated £35bn, up 17 per cent from the first three months and 7 per cent higher than quarter two last year.

But mortgage lending in the three months to the end of June was less than half the level in the same quarter two years ago and compared with almost £94bn in quarter two of 2007. The lending figure for the first six months of 2010 remained unchanged from the first half of 2009 at £65bn.

Paul Samter, economist at the CML, said that while June's figure represented some improvement, it was still indicative of low levels of activity.

"There are signs of house prices stabilising and more properties coming on to the market following the abolition of home information packs. This may improve liquidity in the market, but transaction levels are subdued and likely to remain so while access to credit remains constrained," said Samter.

He claimed that rules proposed last week by the Financial Services Authority (FSA) forcing banks to verify every borrower's affordability would add to the headwinds facing the market, "The consultation paper on responsible lending increases the regulatory burden on lenders and could make it harder for borrowers to access credit."

First-time buyer numbers have slumped in recent months, according to brokerage John Charcol, which said first-timers accounted for just 5.4 per cent of its transactions in June. Drew Wotherspoon , director of marketing at Charcol.co.uk, said: "This is the lowest level it has been since December 2008 and suggests that a combination of strict lender criteria and inherent nervousness in the market continues to severely affect the amount of new entrants. This group desperately needs more competition in the 90 per cent loan-to-value market."

The broker's mortgage index for June also revealed low remortgaging levels, with six out of ten mortgages taken out over the month used for purchases. Wotherspoon said borrowers in a position to remortgage were continuing to wait for some change in the Bank of England base rate before making their move.

However, lenders are increasingly trying to tempt borrowers off low variable rates by cutting their fixed-rate deals. New Moneyfacts data shows that the margin between swap rates, on which fixed rates are based, and the average three and five-year fixed-rate deal has reached an all-time high.

By Jeff Salway