Net mortgage lending by banks grew by 0.8% in the year to July, according to latest figures from the British Bankers’ Association (BBA).
However, gross mortgage lending of £7.1 billion in July was below the recent monthly average and reflected continued low levels of activity in the housing market, the BBA said.
“It is no surprise that these figures are not stronger,” said Peter Williams, executive director of IMLA,. While there has been a marked improvement in the wholesale funding markets this year (particularly structured finance) in terms of both volume and cost, the retail savings markets have remained tight and relatively expensive.
“The combination of increased capital requirements and conduct of business controls impacting on lenders generally will mean the supply of mortgages will continue to be in short supply. As such the industry will not be able to satisfy the housing aspirations of all, and a material level of growth going forward will continue to be a challenge.
“This is not a complaint it’s just a fact of life in an environment where the demand for safer banks and safe lending to consumers is prioritised to the degree that it is.
“The new Funding for Lending scheme may have an impact on gross lending but the benefit is most likely to be directed at lower risk lending which therefore has the potential to distort markets further.”
Wiliams added: “IMLA has serious reservations about the manner in which Funding for Lending is not being made available to smaller banks and building societies and specialist lenders. Aside from being anti-competitive it means that these facilities are not available to those businesses that have a strong track record of innovation. Many which have also been well managed through the financial crisis and have not required a subsidy from public funds to keep them afloat.”
“Bank lending for mortgages remains effectively closed to everyone who really needs it,” said Nick Hopkinson, director of PPR Estates.
“Huge deposits and perfect credit histories remain essential ingredients for anyone brave enough to be buying a house with a mortgage at the moment. Also, the announcement that one of the biggest high-street lenders is increasing its mortgage costs to existing borrowers will be a further blow to many struggling home owners. This is an ominous sign, indicating that real borrowing costs have disconnected from the Bank of England base rate and are moving towards 5%-plus in the near future for most mortgages.
“House prices face an uncertain autumn and are very likely to fall further rather than stay still based on the prevailing economic winds.”