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Gross mortgage lending by banks, building societies and specialist lenders fell by 6% in August, compared with July, to an estimated £32.2 billion from £34.1 billion, according to the Council of Mortgage Lenders. This was 3% down on the £33 billion figure for August last year. The figures are not seasonally adjusted.
The lending figures relate to a period when the current wholesale funding pressures being experienced in the market were less pronounced. During September, a number of lenders have withdrawn lending products, amended their lending criteria, or re-priced their deals.
Not all the re-pricing has had the effect of increasing the cost to the consumer however - some lenders having reduced the rates on their fixed rate mortgage products.
The CML adds it is too soon to say with any accuracy what September lending volumes are likely to show, although initial indications suggest that lending remains robust.
The reduction in available funding could in due course translate through to a reduced supply of lending, although the Bank of England's most recent interventions to support liquidity in the interbank lending market may help to restore the availability of funding more quickly than would otherwise have been the case.
Commenting on the data and the current situation, CML director general Michael Coogan said: "Lending fell slightly in August, but was still at very high levels. We see no obvious decline in consumer demand, although some decrease in the supply of lending is being experienced in the short term as a result of the problems lenders face in raising wholesale funding.
"The events of the past week have shown us how very quickly situations can change. Even after the good news on inflation falling back, the Fed's rate cut, and the Bank of England's support for 3-month funding, it is not a given that the Bank will follow suit on cutting rates.
"It makes sense for consumers to continue to plan for rates at or about their current levels for the foreseeable future - we are not out of the woods yet."
Meanwhile, the British Bankers Association revealed that net mortgage lending rose by an underlying £6.1 billion in August - up on the £5.8 billion witnessed in July and ahead of the £5.4 billion monthly average.
BBA's director of statistics, David Dooks, said that the August data has given no indication of the financial market difficulties seen last week.
Elsewhere, underlying credit card borrowing fell by £0.1 billion, while loans and overdrafts also fell by £0.3 billion.
20 September 2007 © Moneyextra.com
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