Where has all the mortgage cash gone?

Emma Ann Hughes

Emma Ann Hughes

Today (2 August) Coventry revealed it accounted for 47 per cent of all net mortgage lending in the UK during the first half of this year.

That means Coventry - with the greatest respect not a big banks like Royal Bank of Scotland, Lloyds or Santander - accounted for almost half of all gross lending minus repayments at the start of this year.

While we should take a moment to applaud Coventry - not even the nation’s biggest building society (hello Nationwide) - for injecting some much needed fresh cash into the UK mortgage market, I was disgusted by this statistic.

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Disgusted with the banks.

Mortgage balances increased by £1.2bn at the Coventry at the start of this year, a performance in stark contrast to that of the market as a whole. This means Coventry now accounts for 25 per cent of mortgage growth in the UK since the start of 2010.

While the government’s Funding for Lending Scheme - which was supposed to boost the supply of mortgages - has been called upon by most big banks to the tune of tens of billions, the major lenders collectively have reported a significant contraction in mortgage lending.

Why? What are they doing with this cash?

The latest figures published by the Bank of England show that in the first nine months of the Funding for Lending scheme, to 31 March 2013, the 10 largest participating lenders had recorded negative aggregate net lending of more than £8.6bn (excluding Coventry).

Coventry’s positive net lending over the same period of £1.6bn should be used by the government as a slap in the face to the big high street competitors. Why isn’t the government asking where the cash has gone?

My brother and his wife inform me happy times are here again for the UK housing market and therefore the mortgage industry.

Mind you, my brother would say that as he is buying a house in Tooting and I have yet to meet someone purchasing a property who says, “I think the market is in a terrible state.”

But these statistics from Coventry, derived from Bank of England data, suggest to me the UK mortgage market remains far from healthy.

Net new mortgage lending (gross lending minus repayments) by mutuals was £1.4bn in June and £5.5bn in the first half of the year, up from £2.6bn in the first half of 2012.

In contrast lending by other institutions, such as banks, was negative in the first half of 2013 at minus £3bn as mortgage repayments outstripped new lending by those institutions.

Come on banks, you need to do better than this.

And quite frankly, if you don’t improve, the government needs to give you a big kick up the backside.