Mortgage lending 'rises slightly'

According to lenders’ group, activity in housing market remains at a very low level although there has been a slight increase in the number of mortgages sold in UK in the month of February. The Council of Mortgage Lenders (CML) said the number of house purchases rose to 24,300, (up by 4%) compared with January.

CML Director General Michael Coogan says, they are not convinced that underlying trends have shifted sufficiently to change their forecasts for mortgage market activity in 2009, but there are some positive signs for later in the year. According to him, some large banks are making more and more loans available through enhanced lending commitments, which is helpful, but will not satisfy consumer borrowing demand on its own.

The number of completed home loans for house buyers has risen slightly on a monthly basis, running at about one-third of the average of February’s total, ie., 76,000 loans for house purchase between 2002 and 2007. Accordingly, the total value of the completed home loans has remained unchanged at £3.1bn, which remains in stark contrast with the recent years.

There is a 20% decline in the number of remortgaging deals, down from 44,000 in January to 35,000 in February, according to the CML reports.

For home owners, Lenders' standard variable rate (SVR) deals seem to be more attractive than new fixed-rate deals, with plunged interest rates in recent months. This means householders will have less equity, excluding them from the best deals, which require a large deposit. But the bank rate is unlikely to fall further and the new home loan demand can shift back to fixed-rate deals, rather than mortgage deals, tracking the Bank rate. According to figures reported, in February, 56% of new loans were at a fixed rate, up from 49% in January, while 31% were tracker products, down from 38% in January.

First- time buyers

But for first time buyers the situation remained tough as they had to find a record typical deposit of 25%, therefore only 9,400 home loans were completed. This total of completed loans to first-time buyers was up 7% compared with January, but 46% lower than the same month a year earlier.

These figures are not adjusted seasonally. The CML previously reported that gross mortgage lending in February was at its lowest level for any month since February 2001. The CML reports its members' ability to lend was drying up, because many savers were choosing to put their money in National Savings policies because National Savings & Investments (NS&I) has increase its demand much more than its original forecast as savers look for a completely safe home for their money.