Gross mortgage lending fell in September to £11.6 billion, according to the latest estimate from the Council of Mortgage Lenders.
This is 10 per cent lower than August’s gross lending figure of £12.9 billion and a 15 per cent fall from £13.7 billion in September 2011.
Gross lending for the third quarter of 2012 was an estimated £37.3 billion, an 8 per cent increase from the second quarter of this year (£34.5 billion) but a 5 per cent decrease from the third quarter of 2011 (£39.3 billion).
CML chief economist Bob Pannell said: “There have been hints of demand softening over recent months, but monthly patterns may have been distorted by the Olympics. House purchase demand failed to lift significantly in the third quarter, despite much better mortgage availability. Remortgage activity continued to languish, in contrast to relatively strong levels a year ago.”
“As the latest MPC minutes note, banks’ funding costs have fallen significantly over recent weeks, and at least some of this is likely to reflect the impacts of the Funding for Lending initiative and the Extended Collateral Term Repo facility. Some mortgage rates have been reduced since FLS was launched. And lenders responding to the latest credit conditions survey expect the FLS to drive further improvements in mortgage availability this quarter, over and above that seen in Q3.
“While the third quarter saw the biggest increase in mortgage availability since the credit conditions survey began in 2007, especially for higher LTV borrowing (more than 75 per cent) which might be expected to particularly benefit first-time buyers, lenders reported a weak response in terms of stronger house purchase demand.”
Richard Sexton, director of e.surv chartered surveyors, said: “The mortgage market is at a low ebb. High loan-to-value lending accounted for less than one in ten of all house purchase loans in September, and there were 10 per cent fewer home loans than this time last year.
“Funding for Lending has yet to jumpstart first-time buyer lending – historically the beating heart of the housing market. Even though the scheme has flooded banks’ balance sheets with cheaper funds, it hasn’t been enough to offset chronic macroeconomic constraints on lending. Banks are required to hold ludicrously high capital adequacy buffers, which is preventing them from increasing lending with any conviction.
“And the lack of confidence the money markets have in UK economic growth is leaching away mortgage funds from our banks. Lenders have kept credit scoring tight as a result, which has proved a big stumbling block, particularly for first time buyer lending.
“It’s early days though. The effects of Funding for Lending have yet to kick-in. Think of it as nurofen for a headache. The mortgage market has taken its medicine, but once you take a pill you don’t always feel immediate relief, it can take some time to work. The same is true of FLS. Lenders have reported a record increase in quarterly mortgage credit, thanks mainly to FLS. The hope is that this will begin translate into more high LTV lending towards Christmas, though lenders may choose simply to stick with lower LTV products and increase volume in this area. FLS provides an insurance policy to lenders, and the market must hope it will imbue banks with enough confidence to begin relaxing tight lending criteria.”
Brian Murphy, head of lending at Mortgage Advice Bureau, commented: “The September lending figures refer to completions which were hit by the usual summer lull and the effect of the London Olympics. In contrast, MAB found mortgage applications actually increased last month, up 1.9% on August.
“Application activity has been boosted by increased availability of competitive mortgage deals and the launch of the Funding for Lending Scheme, which has seen a number of lenders have now begun to engage with the higher loan-to-value sector again.
“Nevertheless, we still need to see more lenders moving up the LTV curve before there will be any sizeable increase in housing transactions.”
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