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Mortgage Lending to Remain 'Subdued'

Aug 18, 2007
The mortgage market is beginning to dampen, according to new figures.

Statistics released by the Building Societies Association (BSA) indicated that home loan approvals accounted for some 4,739 million pounds (Sterling) over the course of May.

However, during the same month in 2006 this figure stood at 5,454 million pounds - recording a year-on-year fall of 13 per cent.

Meanwhile, 1,261 million pounds was issued via 'new' home loans this May, a decrease of 17 per cent from 2006 figures.

Adrian Coles, director general for the BSA, claimed that such home loan lending had "been buoyant since summer last year", but the latest set of figures are to act as a "good indicator" for future borrowing trends over the remainder of this year.

Mr Coles also claimed that the findings are indicative of a "slow start to the summer".

He said: "There is likely to be more subdued lending as the year progresses and the rate rises continue to feed through.

"Another rate rise would add to the slowdown later in the year and into 2008."

However, Mr Coles pointed out that a "reasonably strong economic outlook" is set to help support lending and house price increases throughout the rest of 2007.

Meanwhile, further statistics from the association have indicated a rise in savings over the course of May, which could result in more consumers being able to stave off problems handling their finances in the future.

According to the BSA, building societies saw some 608 million pounds being set aside last month - almost twice the amount of 306 million pounds saved in the same period last year.

Despite the apparent surge in savings, when seasonally adjusted, these net receipt figures were reported to be "broadly in line" with inflows witnessed over the past nine months.

Mr Coles said: "The rate rises have provided sunnier news for some savers, although many households are not able to take advantage of better rates as higher rates mean paying more on debt."

The study revealed that 404 million pounds was put into cash individual savings accounts last month, down from 466 million pounds during the same period in 2006.

"As such, the rate rises appear to be having a limited effect in attracting extra saving, probably because of the squeeze on disposable income," the director general added.

He also claimed that last year was witness to the smallest increase in disposable income for some 24 years.

Earlier this week, figures released by the Council of Mortgage Lenders (CML) revealed that gross lending reached a record figure for the month of May, accounting for some 30.6 billion pounds.

Despite this total being some five per cent higher than the number recorded in the same month in 2006, Michael Coogan, director general for the CML, claimed that the housing market is showing signs of curbing as secured and home loan yearly growth has generally been around 12 to 15 per cent.

Mr Coogan also pointed out that should interest rates increase further during 2007, demand for lending will "dampen" as potential homebuyers will struggle to make repayments on secured and home loans.
About the Author
Abbi Rouse writes for Essentially Home Loans where visitors can apply for secured loans online, we also specialise in bad credit loans for UK residents. Visit Today: http://www.essentiallyhomeloans.co.uk
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