CML: Mortgage lending up slightly in May but finance still “tight”

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by Kay Murchie

According to the Council of Mortgage Lenders (CML), mortgage lending rose slightly in May by 4% to 37,400 - however, this is still 28% lower than a year ago.

While the rise is encouraging, the CML reports that first-time buyers are having to rely on parents for financial help since without a deposit of at least 25%, mortgages for first-time buyers are hard to secure.

Figures show that home movers, on average, borrowed 67% of the value of the property in May, unchanged from April, and borrowed 2.68 times their income, up from 2.63 in April.

According to the National Association of Estate Agents, finance is still tight and almost a quarter (22.5%) of people were finding it impossible to get a mortgage because of the continuing tightening of lending criteria adopted by banks and building societies since the onset of the credit crunch.

In related news, Redrow and Barratt Developments have today warned that the lack of mortgage availability continues to have an impact on the recovery of the UK property market.

According to the housebuilders, there is renewed interest in their developments but potential buyers are still unable to secure a mortgage.

Mark Clare, Barratt chief executive, said: “During the last six months, the early signs of stability we saw at the start of 2009 in the new housing market have continued, underpinned by limited stock and improved customer sentiment.”

“We have seen higher sales rates, lower cancellations and prices levelling. We are not however going to see a sustained improvement in trading conditions until the availability of mortgage finance, particularly in the higher loan to value segment, recovers.”

Earlier this week, rival builder Persimmon issued an encouraging statement which led to its shares soaring 7% to 390¼p.

Persimmon said in a statement: “We are encouraged by the improvement in sales rates when compared to last year, but will remain cautious until mortgage availability improves further and employment prospects stabilise.”

The housebuilders claims’ appear to be backed up by recent Bank of England figures, which revealed that over 16,000 mortgage applicants are being turned down each month. The figure stood at 12,000 last December but has risen since March.