Gross mortgage lending in July dropped to an estimated £12.6bn, and housing transactions also fell.
According to the Council of Mortgage Lenders, the total was 1% lower than June’s £12.68bn and a 6% fall from £13.3bn in July 2010.
Meanwhile, the National Association of Estate Agents said its members reported a drop in house sales from nine to seven per branch.
The CML said house prices were flat and activity levels disappointing. House sales of 204,000 in the second quarter of the year were the weakest for two years, with mortgage lending reflecting the trend: lending for house purchase is trailing below last year’s levels, while remortgaging levels are trending above. The CML also noted a strong pick-up in buy-to-let lending, although much of the increase is in remortgaging, with lending to landlords for property purchase very subdued compared with a few years ago.
CML chief economist Bob Pannell said: “UK economic prospects have deteriorated as a result of weaknesses in some of the major economies and renewed stresses in the eurozone area associated with the sustainability of government finances.“As a result, UK interest rates look like staying lower for longer.
“Housing market conditions remain subdued, but pretty stable. Seasonal factors continue to provide some support, but underlying house purchase activity may drift lower over the coming months.”
Richard Sexton, director of e.surv chartered surveyors, a firm which carries out a lot of valuation work, said: “July’s subdued figures confirm that June was just a fleeting uptick. The banks are handcuffed by weak economic growth and concerns over their capital liquidity.
“They have pushed out well-publicised high LTV products over the summer, but appearances can be deceptive. In practice, lenders are being forced to target low LTV borrowers: less than 10% of approvals in July were for those needing high LTVs.
“There is a discernible gulf between interest rates on low LTV deals, which are tantalisingly cheap, and the more restrictive rates on deals at 90% LTV and above.“As a result, great swathes of lower income buyers are marooned in the rental market, while the lowest rung of the property ladder hovers just out of their reach.”
