Mortgage lending at lowest rate since 2001

Gross mortgage lending fell 15 per cent during February from the previous month according to a report released by the Council of Mortgage Lending this morning.

Mortgage lending totalled an approximate £9.9billion in February, £1.8billion lower than January, and 60 per cent lower than lending the same time last year.  According to the CML, this is the lowest monthly mortgage lending figure seen since early 2001.

Although February is typically the lowest month for mortgage lending in the UK, the 15% drop between January and February is over three times the typical 3-4% drop.

Michael Coogan, Director General at the CML, blames the fractured government policy that is currently being implemented, that is forcing a few large banks to take the whole burden of lending, rather than encouraging smaller institutions to fill the funding gap.

He said,

“Retail savings are now the predominant source of funding for mortgages. But banks and building societies have seen savings ebb away to National Savings and Investments, which has a negative impact on their ability to lend.

“This is yet another example of fractured policy. There are now fewer active lenders in the market, but the government wants them to lend more. At the same time, the government’s own savings institution is sucking away the funds that would enable them to do so. Until funding improves, the capacity of lenders to lend will remain constrained.”

The report follows yesterday’s news that the FSA is considering a shake-up of banking regulations, that could see loan-to-value and loan-to-income rations regulated for the first time.