Mortgage lending flat as rate rise expectations grow

Gross mortgage lending reached £17.8bn in September, according to latest data published by the Council of Mortgage Lenders, which suggested the slight month-on-month fall is evidence of cooling market confidence as buyer concern over a looming rate rise grows.

The total is 1 per cent less than August’s £18bn but 10 per cent more than September last year when £16.2bn was advanced. Gross mortgage lending for the third quarter of this year was therefore an estimated £55.5bn, 8 per cent up on the second quarter and 13 per cent up on 2013.

Bob Pannell, chief economist of the CML, said: “Uncertainty over when we will see the first increase in UK base rates is exacerbated by weaker growth prospects in several major economies, including the eurozone.

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“Recent indicators and policy actions corroborate our view of a gentle easing in market conditions. There is growing evidence that mortgage lending activity, and the housing market, are sitting on a plateau.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, added the CML figures indicted that “buyers may have concerns about the prospect of an interest rate rise”.

He said: “There is also a sense that economic recovery in Europe is fragile at best, which does nothing for consumer confidence when it comes to committing to something as costly as a property purchase.

“However, swap rates have fallen since September, and this, combined with plummeting inflation, means it is unlikely that interest rates will rise ahead of the general election.

“Lenders who are behind target for the year as a result of the delays caused by the mortgage market review are cutting their fixed rates in order to catch up before the end of December and we expect this to continue as they look to develop a strong pipeline for next year.”

Comments last week from Bank of England economist Andrew Haldane in the wake of the latest fall in inflation to 1.2 per cent have dampened growing expectations of a rate rise in the near future, with consensus estimates now suggesting a move may come after the first quarter of 2015.

The CML’s statistics came as the Bank of England reported mortgage approvals by all UK-resident mortgage lenders for house purchase picked up in June, before easing back slightly in August.

The average monthly net lending flow by UK-resident mortgage lenders was £2.3bn in the three months to August, the Bank reported, broadly unchanged compared to the previous three months.

The annual growth rate in the stock of consumer credit picked up slightly to 6.1 per cent in August, the Bank of England stated.