Loans for house purchase increased in April, according to today’s data from the CML. But, with Bank of England data showing a fall in house purchase approvals in April, there could be a lull in house purchase completions in the next few months.
The CML cites 40,900 loans, worth £5.9bn, advanced for house purchase in April, up from 37,900 worth £5.5bn in March and down from 41,900 worth £6bn a year earlier. While this is a further increase compared to earlier in the year, house purchase activity is still below the level seen in April last year.
With remortgage activity currently linked to expectations of interest rate movements, future activity will be subdued as an imminent increase in the bank rate is now looking less likely. The CML also stated there was a fall in remortgage approvals in April so remortgage completions are likely to remain modest in coming months.
Michael Coogan, director general of the CML, said: “The market continues on a stable footing and the increase in house purchase lending is a good sign that the stability will continue throughout 2011. However, the economic outlook, coupled with Bank of England subdued approvals data for April, suggests a muted summer for mortgage completions so we do not expect further increases in lending over the coming months.”
David Whittaker, managing director of Mortgages for Business, added: “A month of growth in mortgage market activity may be enough for some to herald recovery but one swallow does not make a summer.
“Activity will remain subdued this year with month-on-month rises and falls being the norm and until there is a significant sea-change in the amount lenders are prepared to issue to borrowers we’re unlikely to see a dramatic recovery in the mortgage market. Lenders and government must come up with a sensible balance of capital requirements and lending targets, if they don’t the market will be stuck in the doldrums for a long time to come.”
Richard Sexton, business development director of e.surv chartered surveyors, said: “The subdued lending this April compared to last year shows banks and building societies are still at the mercy of regulatory double-thinking as the government insists they lend more while simultaneously tightening capital adequacy limits.
“First time buyers will be as despondent as ever. Even though house prices have remained broadly flat since late 2006, purchase approvals on properties under £125,000 – typical first time buyer territory – have fallen from accounting for 31% of all approvals back in October 2006 to just 23% of approvals in May 2011.
“The lack of mortgage finance is the constraint. Lenders are the only ones who can get the ball rolling again with any real momentum but they’re stuck between a rock and a hard place at the moment. Any revision to regulation needs to lead the way to new lending.”
