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April 27, 2009

Recovery hopes dashed as UK mortgage lending declines

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by Kay Mitchell

Recovery hopes dashed as UK mortgage lending declines

Figures released by the British Bankers’ Association (BBA) today have revealed that mortgages for house purchases by the UK’s major banks fell for the first time in four months in March.

The BBA said the number of mortgages approved for house purchases fell to 26,097 last month, down 6.8% compared with February and 25% lower than a year ago.

The news is certain to dash hopes of recovery in the housing market after there have been signs of green shoots after the Council of Mortgage Lenders (CML) reported last week that gross mortgage lending rose by 16% last month from February.

However, the CML did point out that lending was still 52% lower when compared with March last year and said the mortgage market remained ’highly dysfunctional’.

Also last week, HM Revenue & Customs (HMRC) revealed a rise of 40% in the number of homes sold in March, compared with February, while a recent poll from the Royal Institution of Chartered Surveyors (Rics) found that housing market activity is picking up after new enquiries increased for the fifth month in a row.

Despite some positive signs of late, many caution that the market is still held back by the lack of mortgage funds. Figures show that without a hefty deposit, a mortgage is still hard to come by.

Commenting on today’s figures, BBA’s statistics director David Dooks, explains: “The banks’ figures show it would be unrealistic to expect the mortgage market to recover in a steady and consistent way in the current economic environment.”

Mr Dooks added that house prices have not yet bottomed out and many other reports suggest that prices will fall by a further fifth bottoming out at the end of this year.

In related news, housing intelligence group Hometrack have reported today that the average cost of a home in England and Wales fell by 0.3% during April.

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