19% decrease in mortgage lending

19 June 2008

Council of Mortgage Lenders (CML) report slow mortgage lending in May

Figures released today by the Council of Mortgage Lenders have shown that mortgage lending remained slow in May with total lending 19% lower than the same time last year.

The amount of money lent as home loans fell from £31.5bn in May 2007 to £26.5bn last month. This £5bn decrease is thought to be due to tightened lending criteria and falling confidence in the housing market.

Although the amount of lending is slightly healthier than the record low of £23.9bn seen last December, much of the activity was for remortgages as opposed to loans for house purchases.

According to the CML, the Bank of England’s data on mortgage approvals for house purchases was suggestive of the fact that lending would be “very week” for the foreseeable future.

Two weeks ago, the Bank of England reported a record low number of mortgage approvals in April, during which only 58,000 mortgages were approved.

Michael Coogan, director general of the CML, said: “The remortgage market remains on track to meet our forecast for growth this year, demonstrating the resilience of the market despite recent bad news.

“However, by comparison, the next few months will remain very weak for house purchase activity for the funding reasons, which are now well rehearsed.

“We still await first signs of the Bank of England’s special liquidity scheme indirectly helping to ease the current logjam,” he added.