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First annual increase in mortgage lending for two years

Lending for house purchase showed its first annual growth in July for the first time since early 2007, according to the latest Council of Mortgage Lenders’ survey.


House purchase lending accounted for 56,000 loans totalling £7.5 billion, which was up from 47,000 loans in July last year. There was an increase in the number of loans on the previous month of 24%, whilst the annual increase on July last year was 19%. However, when we look at the value of the loans this was up 27% on June but was only 6% higher when compared with July 2008.


Although the number of loans for remortgage was 21% up on the previous month, this was still down a substantial 53% on July last year and in terms of value was down 61%. This suggests that home owners are remaining cautious and are reluctant to take on additional debt against their home to fund current spending.

There was a surge in mortgage lending in July

There was a surge in mortgage lending in July


What is particularly promising is that the number of loans given to home owners who were moving was substantially up in July. In fact, there were 20,400 first-time buyer loans and 35,700 home-mover loans in July, up 18% and 28% respectively on June. Although compared with the previous year, the rise in first-time buyer numbers was higher, up 22% with a 17% rise in the number of movers.


For first-time buyers the proportion of income spent on interest payments fell to 15% in July, down from 19.8% in July 2008. For house movers the figures were 11.1% and 17%. This obviously reflects the tightening up by mortgage lenders who are no longer prepared to offer the unsustainably large mortgages to income which they were doing before the crash as well as the fall in interest rates.


Does this mean that the corner has now turned in the housing market? No, not necessarily. According to Paul Samter, Council for Mortgage Lenders economist: “It’s tempting to call the turn in the mortgage market at this point, and there is certainly concrete evidence that lending for house purchase is increasing. But there are still constraints affecting the lending industry’s capacity to fund increased lending as well as less consumer motivation to remortgage for the time being. The overall lending picture is likely to stay relatively subdued for some time, especially as the wider economy is far from robust yet.”

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