21st June 2011
The new figures from the Council of Mortgage Lenders (CML) include lending for both house purchase and remortgage.
However, despite a modest pick-up in overall lending activity during May, lending for house purchases is running below year earlier levels – as April Bank of England approvals data indicate.
Interest rate expectations mean remortgaging figures are unlikely to see a big increase in the second half of the year.
The Bank of England kept rates at 0.5% in June, for the 27th month in a row. Experts are continually pushing back their expectations of when rates will finally rise although many still expect it to be towards the end of 2011.
CML director general Michael Coogan says: "Gross mortgage lending in May recovered after low activity levels in April. Distorting effects from Easter and bank holidays cloud the current picture, but the likelihood seems to be for essentially flat levels of lending over the next couple of months."
However, some experts say flat lending levels could continue for a lot longer than just a couple of months.
Jonathan Samuels, CEO at Dragonfly Property Finance, says lending is still very down in historical terms and it could be some time yet before the market reaches pre-2007 activity levels.
"The CML expects flat ending for the next couple of months but realistically lending activity looks set to remain flat for the next couple of years, just as it has been over the past year," he says, "Competition and appetite among lenders is returning but they are still very conservatively minded, as indeed are borrowers in the current anxious economic climate."
Meanwhile, the latest Rightmove data, showing that asking prices have once again gone up over the past month, highlights the growing disconnect between what sellers think they will achieve and what buyers are prepared, or able, to pay.
The average price at which a home is put on the market rose 0.6%, or £1,520, to £240,394 between May and June. But Rightmove predicts that new sellers' prices will fall by up to 7% in the next six months as underlying market weakness forces them to be more realistic.
"Sellers losing touch with reality in this way will continue to weigh down on activity levels in both the property and mortgage markets," says Samuels.