Estimates show that total gross mortgage lending declined to £10.5 billion in February, some 8% lower than January’s gross lending figure of £11.4 billion.
On an annual basis lending is up marginally with a 1% increase from the £10.4 billion in February 2012 but it is a blow to the property market which is hoping for some good news later from Osborne.
‘There continue to be signs of improvement in activity and sentiment in the housing and mortgage market sector, despite headwinds from a challenging economic backdrop. With relatively strong house purchase numbers and subdued remortgage activity, the underlying position does not appear to have changed much over recent months,’ said CML chief economist Bob Pannell.
‘Further policy intervention in the housing market is expected in today’s Budget and if so, it is important that any policy objectives are clearly articulated,’ he added.
But he cannot hide the fact that the figures are disappointing. The government’s flagship Funding for Lending scheme is not having the desired effect. Duncan Kreeger, director at peer to peer lender West One Loans said that the problem is that traditional lenders simply aren’t lending to the credit worthy businesses and home owners who are in desperate need of finance.
'A few months ago the CML was confidently predicting £156 billion in gross lending this year. Even at the time that looked hugely optimistic. But today’s estimates puts the last 12 months of mainstream lending almost 10% behind that £156 billion target,’ he explained.
‘Even compared to last year’s miserable February it’s bleak,' he added, pointing out that Funding for Lending appears to have only resulted in 1% more gross lending in a year.
Richard Sexton, director of e.surv chartered surveyors, explained that first time buyers just can’t get on the property ladder in the current lending climate.
‘Their personal finances are under siege from record low savings rates, punitively high inflation and rising costs of living. Mortgage rates are low, but deposit requirements are still high and criteria are strict. Despite improving market sentiment, tight credit conditions are having a debilitating effect on the mortgage market,’ he said.
‘They have damaged lending levels. particularly to first time buyers, and impaired banks’ ability to increase lending with any real significance. Despite lower rates than ever, and over 300 new high LTV mortgages, buying a house remains a pipe dream for most,’ he pointed out.
‘Would be borrowers are consolidating and paying off their debts, rather than buying property. Pessimism about the economic future is plaguing the mortgage market. Let’s hope the Chancellor anticipated this continued trend and has plans to help the sector in today’s budget,’ he added.
Paul Hunt, managing director of Phoebus Software said that while it is encouraging to see a small annual rise in gross mortgage lending, an 8% decrease since last month confirms that conditions for lenders and borrowers remain challenging.
'The Funding for Lending scheme has certainly helped make borrowing more accessible, along with a real commitment from lenders to support first time buyers in particular which has had a big impact at the bottom of the ladder. But we are yet to see sustained improvement,' he added.
