Mortgage lending activity increases

Mortgage lending activity increases

	Published : Sat, 19 Nov 2005 12:05 By : Paula Demarzio Print this Story

Even as gross mortgage lending fell in a month by 3 per cent in October to an estimated £27 billion, it is 16 per cent higher than in the same month in 2004. It is also the second highest monthly outcome of 2005 and also one of the biggest on record of the Council of Mortgage Lenders (CML).

CML director general Michael Coogan said: “The resilience of lending activity in recent months contrasts sharply with the ongoing uncertainty about household finances and consumer confidence.”

He expects gross mortgage advances for 2005 to be around £280 billion this year, not very different from the levels seen in 2003 and 2004.The figures include loans for house purchases and remortgages, and also further advances to existing customers. He added: “The decision by the Bank of England's Monetary Policy Committee to hold interest rates steady in November was widely expected, and fits with market expectations that they will remain broadly flat in 2006.” He also expected the housing market to stabilise around current levels in this environment.

According to CML, lending activity is normally expected to slowdown at this time of year. This, it inferred, reflects the continuing recovery in house sales over the past year.

The Building Societies Association (BSA) also said though lending by its members was down from September, it was higher than in October last year. Gross advances during the month totalled £3.8 billion as against £4.4 billion in September and £3.4 billion in October last year.

Adrian Coles, the BSA's director general said: "The market seems to be showing a slow but steady recovery.” But, he added: “…we are nowhere near boom conditions and there is no possibility of such conditions emerging over the next year or two.”

Similarly the British Bankers' Association (BBA) also reported a fall in mortgage lending, but reported that borrowing on consumer credit, loans and overdrafts had increased by £437 million over the month, compared with September's figure of £274 million. Borrowing on credit cards increased £243 million, which is above the average of £98 million in previous six months.

“A small increase in credit card borrowing was consistent with a slight upturn in retail sales, but overall consumers' demand for credit continues to be cautious,” said the BBA's director of statistics, David Dooks.

Howard Archer, chief UK economist feels that the consumers are restricting their spending and borrowing. He added: “Record high debt levels and rising unemployment means that there is an increased need for many consumers to try and repair their balance sheets.”