This is further evidence of a modest improvement in the market over the summer after an exceptionally weak winter. However, activity is still subdued on any historic comparison; this is the lowest July lending figure since 2001 and £11 billion lower than the July average over the previous seven years of £27 billion. Lending volumes remain consistent with our forecast for £145 billion in gross mortgage lending this year.
Advances have picked up in June and July as anticipated. There is typically a strong seasonal rise over the summer months as a whole. The increase is likely to have been driven mainly by a rise in house purchase activity, rather than remortgaging activity, as low reversion rates continue to limit the attraction of refinancing.
CML economist Paul Samter observes: "Most of the indices point to house prices rising modestly over the summer months. The CML's July gross lending estimate of £16 billion is the highest level in nine months and consistent with the rise in house purchase approvals.
"But the bounce-back in activity from the extreme weakness around the turn of the year, coinciding with a seasonal bounce, is limited in how far it can go against the current back-drop. We expect improved sentiment to support the market, but a further significant pick-up is unlikely with so many obstacles in place. As a result, we anticipate some seasonal slowing in lending volumes and housing transactions over the latter part of the year and the picture of a slow but more stable market to emerge."
Andrew Montlake, director, independent mortgage broker Coreco, commented:- "These latest figures support the general feeling that some parts of the lending market are slowly easing, particularly in the large mortgage loan sector. This sector of the market does tend to start moving first before slowly trickling down to the rest of the market as lenders are happier to lend to what they see as “quality” applicants with higher incomes and sizeable deposits. However, there is still a big squeeze in terms of availability and competitive mortgage rates in the wider market despite buyer demand being strong.
"Recent falls in LIBOR and SWAP rates have not being passed onto consumers, and although it is not a given that if LIBOR falls then lenders interest rates must fall, lenders still appear to be more focused on balance sheet repair and profit building than actually lending."
