Asking prices and lending show small increase

Monday 20th July 2009

Gross mortgage lending rose in June according to the Council of Mortgage Lenders (CML), with asking prices up a small amount.

Rightmove said in their research average asking prices were up 0.6 per cent in July, while the Bank of England also released data saying lending figures for May "rose a little".

Following months of negative housing market reports, economists have welcomed today's figures but advised caution, warning the bottom of the housing market may not have been reached yet.

CML economist Paul Samter said: "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.

"But the combined effects of the restricted nature of mortgage funding, reduced number of active lenders, weak labour market and limited consumer demand are likely to hold back any significant and underlying improvement. Our forecast for gross mortgage lending of £145 billion this year is unchanged."

According to the CML data gross mortgage lending in June was an estimated £12.3 billion, a 17 per cent increase from £10.5 billion in May. However, this was a 48 per cent decline for the same month last year.

Peter Bolton King, chief executive of the National Association of Estate Agents (NAEA) said: "I am not surprised to see lending down by 48 per cent from this time last year, as the banks continue to stifle the recovery of the housing market.

"There are plenty of prospective homebuyers out there, but the banks are once again acting as an impediment to the market. Whilst we don't endorse the reckless lending we were seeing 18 months ago, the current situation is farcical and does nothing to improve the housing market and indeed the wider economy."

The average monthly price rise for asking prices was £1,428, said Rightmove, which was the fifth monthly rise. The average asking price is now £227,864 according to the house price index.

Kesh Thukaram, managing director of smartlandlord.co.uk: said: "Rightmove's is the most forward looking index - which makes it difficult to forecast further ahead. But I think it's likely we'll see some more falls after this fillip.

"There are a couple of reasons to think prices will fall again. Firstly, cash-strapped first-time buyers are still finding it difficult to secure home loans - mortgage rates are too high.

"Secondly, the increase in unemployment has yet to be felt by the economy. That will hit the buy to let market especially hard because tenants who have lost their jobs will find it harder to pay the rent."

In the Bank of England lending report for June, May showed the lowest flow of net mortgage lending since the monthly series began in April 1993. The figures also pointed to a further rise in approvals for house purchase in June, "suggesting that mortgage lending for house purchase may continue to strengthen in coming months".

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