Though mortgage lending activity is still weak compared to how it used to be, it did rise a little in February.

The number of new mortgages submitted was 4% higher in February than the previous month according to the Council of Mortgage Lenders (CML). However, they have also warned that though this is an improvement, mortgage lending is still at a “very low level historically.”

The director general of the CML said: “We are not convinced that underlying trends have shifted sufficiently to change our forecasts for mortgage market activity in 2009, but there are some positive signs for later in the year.

“Some large banks are making more funding available through enhanced lending commitments, which is helpful but will not satisfy consumer borrowing demand on its own.”

One Small Step for the Economy?

The number of home loans completed for all buyers increased slightly month-on-month even though the value of these homes is still at £3.1 billion.

These figures do suggest an improvement on recent months, however, compared to recent years, it is still quite severely low.

The number of completed mortgages was running at around a third of the average February total – 76,000 loans for house purchases between 2002 and 2007.

There was however, a 20% decrease in the number of remortgaging deals, from 44,000 in January to 35,000 in February.

The group also found that the choice mortgage at the moment is the Standard Variable Rate (SVR).

Low Value Equals Low Equity

Equity is also a problem at the moment. With house prices falling, as is equity which means that people are excluded from the best deals which require large deposits.

However, now that the Bank interest rates are unlikely to fall further, people are asking for fixed rate deals as opposed to those that rely on the Bank rate. This can be seen in the fact that in February of this year, 56% of new home loans were fixed rate mortgages, compared to 49% in January.

First time buyers are also finding it increasingly tough as the typical deposit to now find yourself is 25%. This has led to only 9,400 home loans being completed.

Michael Coogan of CML said: “Such amounts remain out of reach for all but the most affluent buyers, for example people returning to home ownership after a period of renting, divorcees, or those who get financial assistance from their family.”
Mortgage lending is up 7% from January, though this is not seasonally monitored. It is traditional that there is a lull at the beginning of the year.

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