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Housing market on a knife edge with no sign of a sustained recovery in lending

David Prosser
Thursday 03 June 2010 00:00 BST

Britain's housing market remains finely balanced, analysts said yesterday, as new data revealed only a marginal increase in mortgage lending during April.

The Bank of England said that 49,871 mortgages for property purchases were approved during April, a 2 per cent rise on the 49,008 agreed in March. The April total compared to 45,529 in the same month of 2009 but was below the average monthly figure for the past six months.

The Council of Mortgage Lenders (CML) said that the continued slow pace of lending might force it to revise down its estimate for the total value of mortgage lending this year. It has been predicting that gross mortgage lending would be £150bn for 2010 as a whole, with a figure after redemptions of £15bn. Michael Coogan, the CML's director general, said: "The data is likely to reflect both continuing shortage of mortgage funding and weak consumer confidence, and therefore demand."

Mortgage lenders, already struggling to raise money from the wholesale markets and retail customers, are increasingly nervous about what might happen at the end of 2011, when they will have to begin repaying the support offered by the Bank of England during the financial crisis. Some lenders have already begun to increase the cost of the standard variable rates they charge to longer-standing borrowers.

The lack of mortgage finance could also hit house prices, particularly if increases in capital gains tax in this month's emergency Budget prompt large numbers of second-home owners to put their properties up for sale.

"Nobody can deny that the mortgage and property markets are still very delicately balanced," warned Brian Murphy, from the Mortgage Advice Bureau.

The Bank of England's figures also revealed that unsecured lending is continuing to fall, with consumers repaying more personal loan and credit card debt than they are taking out in new borrowing. Unsecured credit fell by £136m in April.

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