UK mortgage lending up 17 pct in June

LONDON — Gross mortgage lending in the United Kingdom rose by 17 percent in June compared to the previous month but still lagged at about half of year-ago levels, the Council of Mortgage Lenders said Monday.

The figure was echoed by the Bank of England, which reported that the availability of mortgage finance had improved slightly in the second quarter, the first gain since the second quarter of 2007.

The Council of Mortgage Lenders said the boost to lending mainly reflected seasonal factors rather than any strong surge in the economy.

Gross lending in June was estimated at 12.3 billion pounds ($20.3 billion), compared to 10.5 billion pounds in May but 48 percent below June 2008, the CML said. In the second quarter it was estimated at 33.3 billion pounds, the same as in the first quarter and matching the lowest quarterly reading since 2001.

Recent signals from the depressed housing industry have been equivocal.

Halifax, the nation’s No. 1 mortgage lender, reported a slight drop in sale prices in June following a 2.6 percent gain in May. But for the three months to June, regarded as a more reliable trend tracker, sale prices were down 1.9 percent compared to the previous three months.

May was the weakest month for net mortgage lending — advances minus repayments — in the Bank of England’s record series going back to 1993.

Andrew McLaughlin, chief economist at Royal Bank of Scotland, said any rise in house prices was due to the reduced number of properties on the market — the lowest since 1979 — as much as any increase in demand.

“The next key stage in the market’s convalescence will commence if new buyer enquiries go on lifting actual transactions, and if sellers respond by increasing the supply of housing. Fingers crossed,” McLaughlin said.

Peter Bolton King, chief executive of the National Association of Estate Agents, said banks continued to restrict lending.

“When prospective buyers are granted a mortgage in principle they are then faced with further difficulties in actually getting the banks to release the funds,” he said. “A number of NAEA members across the country are reporting complications for homebuyers who have mortgage approval but are unable to obtain the funds from the lenders.”

Net consumer borrowing returned to positive for the first time since December, though the level remained week, the Bank said in its quarterly Trends in Lending report.

“The tentative recovery in net consumer credit excluding credit cards might be consistent with the recent pickup in private car sales, some of which is likely to have been financed by personal loans,” the Bank said.

The Bank reported that businesses were repaying loans faster than they were taking out new credit in May. The report noted a growing preference for businesses to raise funds from bonds and share issues.

“Tighter terms and conditions, and the deteriorating economic outlook, have contributed to weak demand for new borrowing facilities, in particular for capital investment,” the Bank said.

“But looking ahead, some lenders expect the overall availability of credit to the corporate sector to increase over the next three months.”

The Finance & Leasing Association said unsecured lending by its members fell 42 percent in May compared to a year ago, while store instalment credit rose by 7 percent.

Geraldine Kilkelly, the group’s head of research, said consumer caution and restricted availability of wholesale finance both contributed to subdued lending.

FLA members account for about 30 percent of the unsecured lending in the U.K.

On the Net:

Council of Mortgage Lenders, www.cml.org.uk

Bank of England, www.bankofengland.co.uk