A sharp rise in mortgage lending last month reflects seasonal trends rather than a sustainable pick-up in the housing market, economists warned yesterday.
Total mortgage lending hit £12.3bn in June, the Council of Mortgage Lenders revealed, more than 17 per cent up on May's figure of £10.5bn, and the highest monthly total this year. Early summer is traditionally the busiest time of the year for the housing market.
However, last month's mortgage lending was still 48 per cent lower than in the same month last year, and the CML said that over the three months to the end of June, total mortgage advances had been just £33.3bn, no more than in the first quarter of the year, which was the worst period for the sector since 2001.
"The pick-up in June's lending largely reflects seasonal factors, and these may well support lending volumes at moderately higher levels over the rest of the summer," CML economist Paul Samter said.
"But the combined effects of the restricted nature of mortgage funding, a reduced number of active lenders, a weak labour market and limited consumer demand are likely to hold back any significant and underlying improvement."
The CML is sticking to its forecast for total mortgage lending of £145bn for 2009 as a whole, despite some signs of improvement in recent weeks, including new figures from the Royal Institution of Chartered Surveyors which suggest there was a marked increase in the number of property sales agreed last month.
Mr Samter warned that the supply of mortgages, especially to first-time buyers, continued to be limited and that concerns about the state of the economy – particularly the prospect of continued increases in unemployment – were likely to act as a further brake on the housing market.
Howard Archer, the chief economist at IHS Global Insight, said these factors would combine to mean that housing market activity would remain below historical levels for "some time to come", adding that the cost of some mortgage finance had actually begun to increase over the past month or so.
"Consequently, we suspect that house prices will fall a little further, although we acknowledge that they could now be bottoming out," Mr Archer said.Reuse content