Mortgage lending keep dropping

The freeze on mortgage lending shows little sign of thawing as figures reveal the number of home loans fell more than 10 per cent in a year.

The latest lending figures from the Council of Mortgage Lenders shows the number of mortgages approved for new buyers dropped 12 per cent to during the year to February.

Lenders have continued to demand significant deposits since the beginning of the credit crisis amid fears that home owners will default on their loans.

Some of the lost ground was regained in February after numbers edged up by 8 per cent compared with the previous month following a boost in first-time buyers.

However, ,ore than eight out of 10 first-time buyers under 30 only get onto the property ladder because they receive a cash handout from the Bank of Mum and Dad.

Bob Pannell, CML chief economist, said: “The February fall in lending compared to last year was despite the fact that lending in the early months of 2010 was itself depressed following the end of the earlier stamp duty concession. But research suggests cash purchases have remained steady since the credit crunch, indicating that the housing market may be holding up better than the low mortgage lending levels suggest.

“We are likely to see a continuing increase in remortgage activity this year, especially if and when rate rises occur.”

The total number of house purchase loans increased to 32,000 in February, worth £4.6 billion.
First-time buyers made the largest contribution, with 12,400 mortgages worth £1.4 billion, up 13 per cent from January.

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Drew Wotherspoon, of mortgage brokers John Charcol, said: "Lending remains in the doldrums with little sign off this changing any time soon. The prospect of a May rate rise may galvanise some borrowers who have been sitting on a lender's SVR into remortgaging, but with rates so historically low, small increases in bank rate are not likely to drive significant increase in overall lending volumes. We expect lending to remain at the current monthly levels for some time to come."