Mortgage lending up in June

24 July 2009 / by Rachael Stiles

Mortgage lending rose slightly in June, the latest figures from the British Bankers Association (BBA) show, as increased approvals trickle through into lending data.

Gross mortgage lending rose to £7.9billion, up from £7.8billion in May, and marking the first increase since April 2008. However, gross mortgage lending is still 45.8 % lower than it was in June 2008.

Commenting on the data, David Dooks, the BBA's statistics director, said: "Numbers of new home loans approved by the high street banks are recovering from the very low level last November and so far this year, gross mortgage lending has topped £50bn."

In comparison to the rest of the lending market, the mortgage sector is doing well, as appetite for unsecured lending remains constrained.

"Borrowing by non-financial companies continues to be weak," Mr Dooks adds, "either because funds raised on capital markets are replacing bank borrowing or because companies are seeking to withstand the recession by reducing their debt".

Kesh Thukaram, managing director of smartlandlord.co.uk, welcomes the increase in mortgage lending: "It's good news that lending volumes have come up a bit. This will help the housing market to stabilise, and should moderate further price falls."

But the problems in the property market are far from over, Mr Thukaram said, as rising unemployment and lenders' ongoing limited access to funds will continue to restrict lending. 

Furthermore, he added, it is unlikely that these increases in mortgage lending are doing much to help first time buyer mortgage customers or buy to let mortgage investors, who have been amongst the hardest hit by the mortgage drought.

These two groups will "continue to be penalised because of their perceived risk to lenders," he said. "In the medium term though, first time buyers will find themselves with more financing options. Although this will mean fewer tenants trying to rent properties, their demand for property to buy will mean many reluctant landlords will now be able to sell off their properties. This should balance out demand and supply in the private rented sector."

The Royal Institute of Chartered Surveyors (RICS) was cautiously optimistic about what the BBA figures mean for the mortgage market. June's increase in lending "was sufficiently strong to suggest that mortgage approval activity will rise further over the coming months," said Simon Rubinsohn, chief economist at RICS.

However, he added, "it is important to remember that the absolute level of mortgages being sanctioned is still low by historic standards and consistent with a relatively fragile housing market."

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