Gross mortgage lending by banks and building societies in February added up an estimated £9.5
billion, according to the Council of Mortgage Lenders.
This is almost identical to January’s gross lending figure of £9.47 billion and the £9.41 billion
advanced in February 2010.
Although lending remains weak, stronger remortgage activity has continued into the early months
of 2011.
While there has been a seasonal pick-up in demand to buy homes in recent weeks, this appears to be
weaker than a year ago despite the fact that there was a lull at the start of 2010 following the expiry
of the stamp duty concession at the close of 2009.
Lenders fear lending forecasts are too high
CML chief economist Bob Pannell said: “There is little in the latest batch of market data that would
cause us to revise our market forecasts for 2011, and nothing that alters our underlying view that
this is going to be a challenging year for households and the housing market.
“The housing market remains stuck in a rut and, while we do not anticipate much relief in next
week’s Budget, it does present an opportunity for the chancellor to address the reform of stamp
duty.
What we have instead is the introduction of a new 5% band. That is an irrelevance for the majority
of home-buyers but another indication of the haphazard and arbitrary nature of this tax, where
reform is long overdue.”
The CML also comments that the fragile state of household finances means housing confidence is
susceptible to even small changes in interest rates.
While the cumulative extent of interest rate increases this year is unlikely to be large, they may
reinforce the current weakness of mortgage lending. If cash-driven appetite for house purchase
dissipates, our forecast of 860,000 property transactions this year may turn out to be on the high
side, said Pannell.
