CML: Slump in mortgage lending continues

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by Kay Murchie

According to the Council of Mortgage Lenders (CML), the mortgage lending slump continued last month.

The CML figures showed that gross mortgage lending rose slightly in July by 5% compared with June, however this is 27% lower compared with July 2007.

Commenting on the figures, Bob Pannell of the CML, said while there was a slight increase in activity, it still represented a significant decline compared with a year ago.

This year, mortgage lending has declined significantly as the credit squeeze has meant a lack of funds available to banks. Prospective buyers have found it extremely difficult to secure funding.

Recent figures from Moneyfacts.co.uk revealed that there are now 71% fewer mortgages available compared with this time last year.

The Council said the majority of mortgage lending during 2008 has been to people who are not actually moving house. So far this year, just 29% of mortgage lending has been to house buyers with the remainder to new mortgage deals.

Earlier this week, business intelligence company, Datamonitor, said that the UK mortgage market will shrink by a fifth by the end of the year.

Datamonitor is forecasting that that mortgage lending will continue to fall, by a total of 19.3% this year and by a further 3% next year.

The organisation claims that the full impact of the credit crunch has not yet passed through to borrowers.

The news comes despite the recent rate cuts from some of the UK’s largest lenders including Abbey, Halifax and Cheltenham & Gloucester.