Posted on July 21st, 2010 | Categories - Financial News
Mortgage lending was up by 15 per cent in June, according to the Council of Mortgage Lenders (CML).
Gross lending rose to £13.1 billion as compared to the May 2009 figure of £11.4 billion. During the second quarter of 2010 lending reached about £35 billion, up by 17 per cent from the first quarter.
Paul Samter, CML economist, said: “Our gross lending estimate of £13.1 billion in June represents a seasonal pick-up and is higher than June last year, but is still indicative of low levels of activity”.
He continued: “There are signs of house prices stabilising and more properties coming onto the market following the abolition of home information packs. This may improve liquidity in the market, but transaction levels are subdued and likely to remain so while access to credit remains constrained”.
Samter explained that problems could arise as a result of the checks due to be imposed on banks by the Financial Services Authority (FSA) that were announced last week.
Lenders will be forced to look at the income of potential borrowers before issuing loans under the plans – the FSA uncovered that close to half of the loans granted between 2007 to 2010 did not require proof of earnings. This led to an influx of borrowers who could not afford to pay back their loans.
Samter said: “The FSA has outlined a clear direction of travel as part of its mortgage market review. The consultation paper on responsible lending increases the regulatory burden on lenders and could make it harder for borrowers to access credit”.
Self-certification mortgages, where lenders state their income to creditors without providing proof of earnings, will be banned under the plans.
Over coming months the housing market will be subject to further pressures such as unemployment and potentially higher interest rates, which may well keep prices subdued for some time to come.