Gross Mortgage Lending Holding Steady, But Is It Steady Enough?

Figures from the Council of Mortgage Lenders, (CML) today show that gross mortgage lending in June was an estimated £12.3 billion, a 17% increase from £10.5 billion in April and a 48% decline from £24.8 billion in June 2008. The last two quarters have held steady, albeit at low levels.

Whilst there has been some tentative positive news emerging from the housing market in recent days, these latest figures reflect more of a seasonal jump than a long-term improvement. There is still no doubt that lenders are not lending enough to meet consumer demand and where lending is taking place, this is often at seemingly expensive levels. A sustained increase in lenders willingness to lend is vital to help provide the boost to the economy that is sorely needed.

Whilst we know that there are more complex issues around lending and pricing, the CML should be doing more to help to explain these issues to a wider audience. The press is full of commentators accusing lenders of simply inflating their margins without explaining the other side of the argument. It is easy to see why this happens, however, especially as 3 month LIBOR, the high cost of which was blamed for all the issues in the first place, has dipped under the 1% mark for the first time ever.

Whilst lender bashing is good fun, and, as I mentioned in the Independent yesterday, there does seem to be some bumping up of margins and repairing of balance sheets going on, let’s face it they are not charities; it is a little too simplistic just to look at the low cost of Libor and falling SWAP Rates, then point at the mortgage rates on offer and say that lenders are simply making a killing.

As ever brokers could be assisting lenders, but willingness to help explain the issues faced starts to reduce as some lenders seem to be having too much fun broker bashing themselves, almost to the point of seemingly trying to help many out of the market! Make no mistake, a world with diminishing professional independent advice will be a very dangerous place, of no use to anyone.

Meanwhile, MP’s are still trying to rein in the excessive bonuses banking institutions pay. It is ironic that those very same MP’s willing to claim expenses for all manner of things to bump up their own pay then turn round and suggest, for example, taxing bonuses at 90% !

This misses the point. It is not the idea of the bonus itself that is the issue, it is the way that bonuses are earned if they are linked to taking excessive risk. We have seen that, like it or loathe it, a vibrant financial sector is crucial to our economic wellbeing, so more time should be taken to tackle the main issues at root level rather than just taking Draconian methods that show a lack of understanding.

As with the aftermath of many a major issue, just throwing more rules and regulations at a problem can often create more of an issue for the future, and whilst the Government may demand lenders lend more on one hand, they are making it harder to do so with the other.

This issue looks set to run and run as the backdrop to the next election but so far the major parties cannot even agree on who should be regulating let alone what form this regulation should take.

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