Mortgage lending edges up

Mortgage lending edged higher in February after diving by a third during the previous month, figures showed today.

Around £9.2 billion was advanced to borrowers during the month, 6 per cent more than in January, when lending levels were hit by the end of the Government's stamp duty holiday, according to the Council of Mortgage Lenders.

The group said it is "unusual" for advances to rise during February, although it added that it is unsurprising this year as the December and January figures were distorted by the change to the stamp duty threshold.

Despite the rise, lending during February was still the second lowest since February 2000. It was 6 per cent below lending levels for the same month of 2009.

Advances during the month were hit by a combination of the end of the stamp duty holiday and the wintery weather in January, which caused potential buyers to stay at home and had a knock-on effect on February's lending.

The fall in activity in the housing market saw Nationwide and Halifax reporting price falls of 1 per cent and 1.5 per cent respectively for February.

It remains to be seen if the drop was caused by one-off factors, or if it is the start of a new trend in the housing market, with many economists suggesting the recent recovery may have run out of steam.

Despite the low level of lending during January and February, the CML said the figures are broadly in line with its forecast that lenders would advance a total of £150 billion during the whole of 2010.

Paul Samter, CML economist, said: "As we look forward, we expect emerging signs of improvement as confidence in the economy grows and we move past the election.

"Given the short-term weakness and distortions in the housing market, as well as more properties coming on to the market, it was perhaps unsurprising to see falls in some of the monthly house price indices in February.

"With activity unlikely to pick up much in the short term, we would expect to see continuing price fluctuation in the coming months."

But he added that while they are better than a year ago, funding markets still remain difficult, and this is likely to continue to limit mortgage availability.

The Bank of England also reported today that mortgage advances for house purchase had "picked up slightly" during February, but the number of people remortgaging remained low.

The Trends in Lending report showed that the number of mortgages approved for house purchase dropped again during the month, following sharp falls in January.

The Bank said that although mortgage demand had "recovered somewhat" in February, some lenders said it remained weaker than expected.

Howard Archer, chief UK and European economist at IHS Global Insight, said: "The mortgage approvals information from the Bank of England survey, in particular, adds to the impression that housing market activity has faltered early in 2010.

"(It) reinforces our belief that prices will be prone to corrections and no more than flat over the year as a whole amid still largely unfavourable economic fundamentals and tight credit conditions."