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Lending for residential property up in UK but outlook still subdued

Figures releases today (Tuesday 20 September) by the Council of Mortgage Lenders show that gross mortgage lending was an estimated £13.4 billion in August, a 6% rise from £12.6 billion in July and a 10% increase from £12.1 billion in August 2010.

This is the highest monthly total since July 2009 when it was £14 billion and the highest monthly total for August since 2008 when it was £19.3 billion.

‘Much of the recent variation in monthly lending figures appears to have reflected seasonal factors, with the underlying picture being one of activity levels that continue to be subdued but broadly stable,’ said CML chief economist Bob Pannell.

‘The August performance more or less offset the weaker than expected July figure. Taking July and August together, lending has shown little change on the same months of 2009 and 2010,’ he added.

According to Duncan Kreeger, chairman of bridging lender West One Loans although mortgage offers look pretty attractive at the moment the long term trends don’t look very different.
‘Strict lending criteria on the high street combined with the growth in the private rented sector look set to continue driving growth in the bridging market,’ he added.

David Brown, commercial director of LSL Property Services believes that August's pick up must be put into the context of a more subdued mortgage market in July, where some mortgage activity was delayed until the following month.

‘Nevertheless, the mini bounce back demonstrates that lenders do have the appetite to lend despite the challenging economic environment. Demand for mortgage finance, too, has improved, with buy to let investors and home buyers with sizeable deposits looking to take advantage of historically low rates on offer,’ he explained.

‘However, it's difficult to see a double digit percentage improvement in the mortgage market being sustained over the medium term. The current turmoil in the markets combined with many banks' need to repay their debt to the government makes it difficult to foresee them being in a position to significantly increase their level of funding to would be mortgage borrowers,’ he added.

David Whittaker, managing director of Mortgages For Business, said increased activity levels among investors and professional landlords boosted gross lending in late summer. ‘With interest rates set to be kept low for at least another year and the rental market growing stronger by the day buy to let investors have capitalised on low property prices and high yields,’ he pointed out.

‘While lending to first time buyers remains subdued thousands will remain reliant on the private rental sector and landlords will continue to take advantage of the opportunities to increase their presence in the market,’ he added.