Mortgage Lending still subdued

Gross mortgage lending in February increased to an estimated £9.2 billion, a 6% rise from £8.7 billion in January, according to new data published by the Council of Mortgage Lenders. An increase in lending in the shortest month is unusual but unsurprising this year, given that the end of the stamp duty holiday distorted lending figures considerably in both December and January.

Lending in February was down 6% on £9.7 billion a year earlier, but the first two months of this year are broadly in line with our forecast for lending of £150 billion for 2010 as a whole.

CML economist Paul Samter commented:

"As we look forward, we expect emerging signs of improvement as confidence in the economy grows and we move past the election. However, the need for the authorities to address fiscal deficit will inevitably slow the economy. At the same time the funding markets, while certainly better than a year ago, remain difficult and will likely limit the flow of available housing finance.

"Given the short-term weakness and distortions in the housing market, in addition to signs of more properties coming onto the market, it was perhaps unsurprising to see falls in some of the monthly house price indices in February. With activity unlikely to pick up much in the short term, we would expect to see further modest volatility in the coming months."