Mortgage lending picks up after quiet summer
Mortgage lending rose by 5 per cent during October as the market continued to recover from its traditional summer dip, figures showed today.
A total of £13.5 billion was advanced during the month, up from £12.9 billion in September, but still 27 per cent below the figure for October last year, according to the Council of Mortgage Lenders.
The group said the 5 per cent rise during October was in line with increases seen for that month during the past decade.
Activity in the market typically picks up in September and October following a drop during August as potential buyers go on holiday.
The Council of Mortgage Lenders (CML) said the steep year-on-year falls in mortgage advances were likely to reduce during the coming months, as lending volumes had dropped sharply during the final months of 2008 and early 2009.
Paul Samter, CML economist, said: "There has been a significant change in the type of lending taking place from the start of the year.
"House purchase activity has picked up significantly. In contrast, remortgaging has dropped to decade-low levels as many borrowers have little incentive to refinance when they move onto low reversion rates, and others find themselves unable to do so due to equity constraints.
"The coming months are likely to be dominated by seasonal factors rather than underlying change."
The group said lending during October was in line with its revised forecast for total advances of £141 billion during 2009.
It expects lending to slow down during the rest of the year due to seasonal factors in the run up to Christmas.
Advances are expected to remain subdued in 2010 as lenders continue to struggle to access funding.
The group is predicting net lending, which strips out redemptions and repayments, will increase to £15 billion, nearly double the £8 billion it expects for this year, but well down on 2007's figure of £108 billion.
Total mortgage advances are also expected to remain low at £150 billion, less than half 2007's figure of £363 billion.
The Bank of England, which also released its monthly report on lending trends today, said total mortgage advances for house purchase held up in October, but there was a further fall in the number of people remortgaging.
It added that data from the major lenders showed that the number of mortgages approved for house purchase rose further during the month to 61,000, up from 56,000 in September.
Banks said the availability of mortgages had increased, due largely to falls in their own funding costs, house price rises and low interest rates, which have led to fewer people than expected getting into arrears.
But the Bank said net lending to businesses remained negative during September, contracting by £4.6 billion, and demand is expected to continue to be subdued for the rest of the year.
It said that while some businesses said the availability of credit had eased, others continued to report concerns about their access to finance.
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