Mortgage lending shows modest signs of recovery

Mortgage lending increased in April, according to three sets of figures out today, but there were mixed messages from lenders.

While some suggested that the housing market has stabilised, others were concerned about the continued weakness in borrowing figures.

According to the Council of Mortgage Lenders (CML), gross lending in April was up 2% on March to a total of £21.5bn. Lending for house purchases increased by 7% to £9.1bn and made up 43% of the mortgage market - 3% more than in March.

However, year-on-year figures showed a 28% decline in lending to homebuyers.

First-time buyers remained thin on the ground, accounting for 32% of lending for purchases. However, this marks a 4% increase on April 2004's figures and a 1% rise since March, Home movers accounted for the remaining 68% of borrowers.

For the fourth consecutive month the amount lent to remortgage customers surpassed that borrowed by purchasers, although the figure fell 3% to £9.4bn. This is also the fourth successive month in which the proportion of mortgage lending accounted for by remortgaging has fallen - down from 46% in March to 44% in April.

The CML's director general, Michael Coogan, said the figures were in line with the council's broad expectations for the year. "It now seems clear that the market has stabilised at its new lower level and we expect to see a continued soft landing as long as the Bank of England resists any new temptation to raise interest rates."

The Building Societies Association (BSA) also talked of a soft landing as it released its lending figures for April. Total lending across societies was £3,409m, compared with £4,009m in April 2004. This represented a downturn on March's figure of £3,491, but was higher than figures for January and February.

Approvals, mortgages that have been agreed but not yet completed, decreased slightly to £3,880m from £4,058m in April 2004. In March 2005, approvals were worth £4,499. However, seasonally adjusted figures painted a more positive picture, with lending - and approvals - up to the highest level since August last year.

"Mortgage lending has clearly stabilised," said Adrian Coles, director general of the BSA. "After the fall-back in lending over the past year there has been a slight recovery in April."

Figures from the British Bankers' Association showed that mortgage lending continued to increase in April but at a slower rate than in previous months. Net mortgage lending for the month was up £4.0bn - some £0.5bn lower than March's figure and the average increase in the previous six months.

The BBA painted a less positive picture of the market. "The weaker recent picture of mortgage demand continued in April and tied in with other reported indicators of a slowing housing market," said David Dooks, BBA director of statistics.

Looking at today's figures, Howard Archer, chief UK economist at consultancy Global Insight, said: "The mortgage lending data for April are mixed, with the BBA's data showing the smallest rise in mortgage lending since February 2002, but the BSA and CML data pointing to stabilisation at a low level.

"Recent survey evidence indicates that something of an impasse is developing in the housing market between buyers unwilling, or unable, to pay the prices being asked and sellers unwilling to drop their prices.

"Meanwhile, lending to individuals was very low in April indicating that consumers remain cautious in their borrowing. This will reinforce speculation that consumer spending will continue to be subdued and that the Bank of England's next move will be to cut interest rates."