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CML: UK Mortgage market ‘muted'

The mortgage squeeze continues to tighten with a further drop in lending, according to new figures.

Gross mortgage lending declined to an estimated £23.8 billion in June, down 3% from May and 32% from June 2007, according to the Council of Mortgage Lenders.

The decline between the first and second quarter was a marginal 1%. However, an increase would typically be expected in spring.

The year-on-year decline has gathered pace in recent months; lending in the first quarter of 2008 was down 11% on 12 months earlier, while the second quarter was down 21%.

CML director general, Michael Coogan commented: "Market activity during a traditionally a busy time of year for mortgages has been muted by funding shortages and, more recently, dampened consumer demand.

"While by historic comparisons we still have had a good level of gross lending, new net lending has been constrained in 2008 and this picture will continue for the rest of this year.

"Government efforts to help housing associations purchase new-build properties and borrowers to save for a deposit are welcome, but are likely to have only a marginal impact on the housing market.

"The recent reduction in short-term fixed-rate mortgage costs is a small bit of welcome news for hard-pressed households facing significant pressures on their finances from the higher cost of food and fuel, in particular.

"However, borrowers on tight budgets will have to plan ahead to manage higher mortgage payments than they have been used to. Speak to your lender early remains the advice for anyone struggling to pay."

Nicholas Leeming, director of propertyfinder.com, added:‘New lending has stalled as lenders are simply unable to access funds to lend to willing borrowers. 

"The resulting gridlock in the housing market is helping no-one and exacerbating the economic slowdown. 

"People want to move, people want mortgages - we now need the regulators to address the market failure that is paralysing the system. 

"Further measures to increase money market liquidity in the short term are needed and we would urge the Bank of England to increase its existing facilities straight away".