No cheer for borrowers in latest home lending figures

Mortgage lending for buying and refinancing homes was up 5% in July – an increase from £12.9 billion in June 2010 to £13.6 billion in July but a disappointing £0.4 billion down on July 2009.

Effectively, despite the Bank of England’s making billions available with a quantative easing policy to provide funds to encourage banks and building societies to lend, the amount of money available to home owners to borrow has stood still for a year.

The figures come from the Council of Mortgage Lender’s latest lending report. The organisation is the trade ‘body’ for 95% of the UK’s mortgage lenders.

The CML reports banks and building societies are on-track to lend a forecast £140 billion this year.

CML economist Paul Samter said: “It is difficult to see anything other than a slow market for the rest of this year as underlying activity remains subdued. The rest of 2010 is likely to see rather lower lending and transaction numbers compared to the same period last year.

“For most home owners, the situation is not that bleak. The vast majority of households continue to pay their mortgages in full every month, and many have benefited from the record low interest rates. This looks set to continue for some time yet. While there are a range of risks to the outlook, low rates will further help most stay on top of their finances.”

Meanwhile, independent financial advice service Moneyfacts claims borrowers are paying record margins between mortgage interest rates and the cost banks and building societies pay on the money markets for raising cash to lend.

Two years ago, the margin on a two-year rate fixed deal was 1.28%, compared to 3.29% now.

The increased margin means, a borrower repays £149 per month more on a £150,000 mortgage – about an extra £3,576 over the 24-month term.

“Mortgage rates are falling, but only a fraction of the reduced funding cost is passed on as lenders divert the cash to repair their balance sheets,” said Michelle Slade, of Moneyfacts.

“Borrowers will be angered that they pay the price for mistakes made by lenders, particularly those who have accepted government funding.

Full CML figures: http://www.cml.org.uk/cml/media/press/2694

Note from The Money Centre

Despite the fact that lenders have increased their margins, the cost of borrowing remains at an all time low. New buy-to-let mortgage business is coming from two sources;

1. refinancing to release equity to fund deposits to buy more properties whilst they are so cheap or
2. to fund new purchases.

Refinancing to get better rates is pretty much a thing of the past. Please remember that buy-to-let mortgage quotations are available to you 24/7 – simply click here

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