http://www.guardian.co.uk/money/2011/may/20/mortgage-lending-slumps?CMP=twt_gu
Mortgage lending plummeted in April to £9.8bn, down 14% from the £11.4bn advanced in March and 5% below the £10.3bn lent in April 2010, according to latest data from the Council of Mortgage Lenders (CML).
The organisation admitted that "taken at face value, the underlying picture is one of considerable weakness – revisiting levels seen briefly at the start of 2010". But it blamed the "slight seasonal decline" on Easter falling in April this year, coupled with the extra bank holiday for the royal wedding.
CML chief economist Bob Pannell said: "Statistical noise, associated with extended holidays and the royal wedding, makes it harder to read the immediate market situation. This represents an unfortunate temporary loss of signal at a time when it would be useful to gauge the resilience of house purchase demand to economic uncertainties and the pressure on household incomes.
"Levels of activity look set to remain broadly flat over the near term. It now seems unlikely that interest rates will rise much, if at all, this year, and this should help keep the market on an even keel. Nothing immediately suggests that housing demand is waning."
Pannell also acknowledged the average house price figures from Halifax and Nationwide – showing 1.4% and 0.2% falls in April respectively – are consistent with the UK "experiencing a modest downwards drift of house prices. We would not be surprised if interest in remortgaging wanes a little as expectations of higher interest rates fade and, as a result, activity tails off over the next few months."
Brian Murphy, head of lending at independent mortgage broker the Mortgage Advice Bureau, also said the April lending data should not be taken seriously. "Before the country packed up and went on an extended break, mortgage activity in the earlier part of April was actually running at February and March levels. But then it went off a cliff," he explained. "In May, to date, activity has picked back up and is running at the levels seen in March and the first half of April."
But Howard Archer, chief economist at IHS Global Insight, said there was "little doubt" that housing market activity remains very weak compared to long-term lows, even if it has edged up slightly.
"This fuels our belief that house prices are headed lower over the coming months," he said. "We suspect that further modest falls in house prices are more probable than not over the coming months as tighter fiscal policy and the possibility of gradually rising interest rates before the end of 2011 maintains pressure on the housing market."
Murphy said he had seen an extraordinary period of repricing among lenders, who are vying with each other to attract new business: "This is good news for buyers and there are some very competitive rates coming out, even at higher loan-to-values."
Nationwide building society has reduced the rate on its two-year fixed mortgages by 0.3 percentage points, and its three- and five-year fixed mortgage rates by 0.1 percentage points. This takes its best-buy three-year fixed-rate mortgage to 3.69% (up to 70% loan-to-value), but there is a £400 product fee (rising to £900 for those remortgaging) and a £99 booking fee.
Santander, meanwhile, has launched a two-year fixed-rate mortgage at 90% loan-to-value at 5.29% with a £495 fee, although homebuyers must be a Santander First Home Saver account customer. This pays 5% to non-homeowners aged between 16 and 35 who deposit between £100 and £300 a month by standing order.
Newcastle building society recently expanded its mortgage range with the addition of a new five-year fixed-rate mortgage at 4.99% available up to 80% loan-to-value for first-time buyers and re-mortgage customers, with a completion fee of £499 and a £195 reservation fee.
Louise Holmes at Moneyfacts said the rate on the Santander product was competitive. "Higher loan-to-value mortgages have begun to make a return to the market recently – however, this is certainly one of the best overall short-term fixed package for rate, fees, borrowing amounts and incentives to grace the mortgage market this year."
Mortgage lending plummeted in April to £9.8bn, down 14% from the £11.4bn advanced in March and 5% below the £10.3bn lent in April 2010, according to latest data from the Council of Mortgage Lenders (CML).
The organisation admitted that "taken at face value, the underlying picture is one of considerable weakness – revisiting levels seen briefly at the start of 2010". But it blamed the "slight seasonal decline" on Easter falling in April this year, coupled with the extra bank holiday for the royal wedding.
CML chief economist Bob Pannell said: "Statistical noise, associated with extended holidays and the royal wedding, makes it harder to read the immediate market situation. This represents an unfortunate temporary loss of signal at a time when it would be useful to gauge the resilience of house purchase demand to economic uncertainties and the pressure on household incomes.
"Levels of activity look set to remain broadly flat over the near term. It now seems unlikely that interest rates will rise much, if at all, this year, and this should help keep the market on an even keel. Nothing immediately suggests that housing demand is waning."
Pannell also acknowledged the average house price figures from Halifax and Nationwide – showing 1.4% and 0.2% falls in April respectively – are consistent with the UK "experiencing a modest downwards drift of house prices. We would not be surprised if interest in remortgaging wanes a little as expectations of higher interest rates fade and, as a result, activity tails off over the next few months."
Brian Murphy, head of lending at independent mortgage broker the Mortgage Advice Bureau, also said the April lending data should not be taken seriously. "Before the country packed up and went on an extended break, mortgage activity in the earlier part of April was actually running at February and March levels. But then it went off a cliff," he explained. "In May, to date, activity has picked back up and is running at the levels seen in March and the first half of April."
But Howard Archer, chief economist at IHS Global Insight, said there was "little doubt" that housing market activity remains very weak compared to long-term lows, even if it has edged up slightly.
"This fuels our belief that house prices are headed lower over the coming months," he said. "We suspect that further modest falls in house prices are more probable than not over the coming months as tighter fiscal policy and the possibility of gradually rising interest rates before the end of 2011 maintains pressure on the housing market."
Murphy said he had seen an extraordinary period of repricing among lenders, who are vying with each other to attract new business: "This is good news for buyers and there are some very competitive rates coming out, even at higher loan-to-values."
Nationwide building society has reduced the rate on its two-year fixed mortgages by 0.3 percentage points, and its three- and five-year fixed mortgage rates by 0.1 percentage points. This takes its best-buy three-year fixed-rate mortgage to 3.69% (up to 70% loan-to-value), but there is a £400 product fee (rising to £900 for those remortgaging) and a £99 booking fee.
Santander, meanwhile, has launched a two-year fixed-rate mortgage at 90% loan-to-value at 5.29% with a £495 fee, although homebuyers must be a Santander First Home Saver account customer. This pays 5% to non-homeowners aged between 16 and 35 who deposit between £100 and £300 a month by standing order.
Newcastle building society recently expanded its mortgage range with the addition of a new five-year fixed-rate mortgage at 4.99% available up to 80% loan-to-value for first-time buyers and re-mortgage customers, with a completion fee of £499 and a £195 reservation fee.
Louise Holmes at Moneyfacts said the rate on the Santander product was competitive. "Higher loan-to-value mortgages have begun to make a return to the market recently – however, this is certainly one of the best overall short-term fixed package for rate, fees, borrowing amounts and incentives to grace the mortgage market this year."
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