Recovery hopes dashed as mortgage lending falls 58% on year in May

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by Kay Murchie

Figures released by the Council of Mortgage Lenders (CML) today show that mortgage lending fell by 58% in the year to May 2009, dashing hopes of a recovery in the housing market.

Lending for home buyers has been increasing recently and along with many other positive reports in the housing market it was hoped that a recovery was well underway, particularly as the Halifax and Nationwide reported a slight rise in house prices in May.

However, gross mortgage lending totalled £10.3 billion in May, 2% down on the £10.5 billion reported in April, according to the CML. Furthermore, May’s figure is 70% lower than the peak of summer 2007.

Commenting on today’s figures, CML economist Paul Samter, said: “Lending volumes appear to have stabilised at extremely low levels, but the weak labour market and lenders’ limited access to funding will constrain activity for some time yet.”

“Underneath the headline gross lending figure, it’s likely that a moderate improvement in house purchase lending in May has been offset by very low remortgaging volumes as borrowers stay with existing deals“, added Mr Samter.