UK property lending up in June but still way below desired levels as prices head down

An estimated £13.1 billion was loaned in June compared with £11.4 billion in May. The June figure is also 7% higher than in June 2009 but lending in the first half of the year totalled £65 billion, unchanged compared to the first half of 2009.
 
‘Our gross lending estimate of £13.1 billion in June represents a seasonal pick-up and is higher than June last year, but is still indicative of low levels of activity,’ said CML economist Paul Samter.
 
‘There are signs of house prices stabilising and more properties coming onto the market following the abolition of home information packs. This may improve liquidity in the market, but transaction levels are subdued and likely to remain so while access to credit remains constrained,’ he explained.
 
But a significant improvement is unlikely in the short term. ‘The FSA has outlined a clear direction of travel as part of its mortgage market review. The consultation paper on responsible lending increases the regulatory burden on lenders and could make it harder for borrowers to access credit,’ he warned.
 
The slight improvement in lending has been helped by the abolition of Home Information Packs and a higher number of new mortgage products being available, according to Adam Challis, head of research at Hamptons International.
 
‘These figures show that market demand remains strong. However, the supply of properties also continues to grow, more than offsetting this increase. In June, Hamptons averaged more than eight new buyers per new instruction. This is down 13% from June 2009, but nearly 40% above the June 2008 level,’ he said.
 
‘An increasing supply has meant that asking prices are being adjusted down by up to 5% in some locations. Sellers need to be realistic in order to attract buyers,’ he warned. He expects price adjustments in the second half of the year to ‘more than reversing the gains since January’ with prices 1 to 2% lower over the course of the year, before returning to moderate growth of 3 to 4% in 2011.
 
‘The overall vibe is one of subdued acceptance that the housing market is going nowhere fast. While lending is slowly improving the full impact of the cuts won’t be felt for a while. This will have a double pronged affect of putting thousands of jobless homeowners at risk of losing their homes but also offer the possibility that these homes may then be sold on at cheaper rates by banks,’ he added.
 
Practical solutions are needed to encourage banks to fund mortgage lending, according to the Association of Mortgage Intermediaries (AMI). ‘All the main Banks face challenges to their ability to fund mortgage lending as the Special Liquidity Scheme reaches its repayment phase early next year. A practical solution is required that allows a sustainable mortgage market, so that consumers can look for a property safe in the knowledge that funds might be available,’ said AMI director Robert Sinclair.
   
With the emergency budget behind us we have more certainty about interest rates, taxation plans and likely levels of unemployment as the public finances are brought under control.  We expect house prices to have a large degree of regional variation, with prices overall reaching the year end much the same as now. Brokers continue to exert significant influence over the market as customers continue to use them to look across the market. This ensures they have the best chance of getting a mortgage that will allow them to complete on the property they want,’ he added.