Mortgage lending activity falls 12% in a month

Mortgage lending activity fell 12% in August, compared with the month before.

The Mortgage Advice Bureau said the fall could not just be explained by seasonal variation.

MAB, which operates from estate agency offices and has 400 outlets, reported today that purchase mortgage applications dropped by 10.8%, and remortgage applications by 15.3%.

There were huge regional variations. The most significant drop-off in purchase mortgage applications was in the North of England (which includes Cumbria and Tyne & Wear), with a 23.6% fall in applications in August compared to July.
 
By contrast, in the North-West (which includes Lancashire, Greater Manchester and Merseyside) there was a surprising 9.4% rise in mortgage applications in August compared to the previous month.

The average LTV on purchase mortgages dropped from a six-month high of 71.1% in July to 70.2% in August, while the average loan size for purchases dropped from £139,404 in July to £129,270 in August.

In London where there was a surge in mortgage applications of 9.2%. The average LTV on purchase mortgages fell from 68% in July to 66.4% in August. A year ago, the average LTV on purchases in London was 73.6%. The average loan size across London in August was £249,728, which is 11.3% lower than in the previous month (£281,504), while two-thirds of all mortgage applications by London purchasers were for fixed-rate products.

Overall in August, 41.5% of applicants chose a variable rate mortgage, compared to 38.8% in July.

The average age of a UK mortgage applicant in August was 37.

Brian Murphy, head of lending at MAB, said: “Although mortgage activity typically drops off in August due to the summer holiday period, the decline this year is certainly larger than we would expect on seasonal factors alone.  

“There’s no doubt that the mini-housing boom we’ve witnessed over the past year has slowly run out of steam, and with prices likely to tail off, or at best remain flat for the rest of the year, mortgage activity is unlikely to pick up noticeably before 2011.  

“With public sector cuts and tax hikes around the corner, inflationary concerns and constant doom-mongering about a double-dip recession, buyers’ confidence is hardly robust.  

“We should have a much clearer picture as to how the mortgage market is likely to perform for the rest of the year once the Coalition Government announces its spending review next month, and many prospective buyers are likely to wait until the details of the review are published before they make a decision on whether to burden themselves with more debt.”

Andrew Montlake, director of London-based independent mortgage broker Coreco Group, said: “London property, for the time being at least, continues to be the domain of those with high basic salaries, steady employment and cash deposits, whilst those constrained by lender apathy will probably continue just window-shopping for the time being.”