May gross lending still subdued

Gross mortgage lending totalled an estimated £10.3 billion in May, a 2% decline from the £10.5 billion in April and down 58% from May 2008, according to new data from the Council of Mortgage Lenders.

As gross mortgage lending includes both lending for house purchase and remortgage, then even if house purchase activity is showing a slight lift it will not be fully reflected in overall gross lending when remortgaging is declining - as indicated in recent approvals data from the Bank of England. Remortgaging has fallen away in recent months in the face of attractive reversion rates and tighter lending criteria for the best deals.

CML economist Paul Samter said:

“While recent signs from the housing market have been more encouraging, we do not anticipate a significant recovery in activity in the coming months. Lending volumes appear to have stabilised at extremely low levels, but the weak labour market and lenders’ limited access to funding will constrain activity for some time yet.”

“Underneath the headline gross lending figure, it’s likely that a moderate improvement in house purchase lending in May has been offset by very low remortgaging volumes as borrowers stay with existing deals.”