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Cml Initial Figures For July And Market Commentary

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July initial data (gross lending)

http://www.cml.org.u...edia/press/3018

18 Aug 11 Gross mortgage lending in July was an estimated £12.6 billion, according to new data from the Council of Mortgage Lenders. This is marginally lower (1%) than June's gross lending figure of £12.68 billion and a 6% fall from £13.3 billion in July 2010.

In today's market commentary, CML chief economist Bob Pannell observes:

"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."

Market commentary:

http://www.cml.org.u...arketcommentary

Market commentary

18 August 2011

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.

Economy

Over the past few weeks there have been troubling reminders about the fragility of some of the world's major economies.

In the US, we witnessed a near-paralysis in policy-making as Congress struggled to reach a deal on restoring government finances to longer-term health. An eleventh hour agreement, deferring detailed decisions until November, left significant uncertainties remaining and proved too weak to stave off the first ever – but largely symbolic - downgrade of US sovereign debt by a rating agency.

The more negative aspect of the compromise deal reached by Congress was that it exposes the US economy – already experiencing a weaker than hoped for recovery – to an unnecessarily sharp fiscal contraction due to the expiry of temporary tax cuts. This prompted The Economist newspaper to highlight 50:50 odds of the US experiencing a double dip over the coming year.

And closer to home, we have seen the most serious twist yet in the ongoing eurozone debt crisis.

Almost as soon as a second rescue package for Greece had been agreed, investors became rattled as to whether European leaders had the appetite and firepower to underwrite the public debt of Spain and Italy.

Large scale purchases of Italian and Spanish sovereign debt by the European Central Bank – in exchange for more fiscal austerity measures - have brought down their borrowing costs for the time being, and so provided some breathing space for politicians to agree new institutional arrangements. Meaningful reforms raise fundamental issues concerning the nature and extent of economic integration for the 17 eurozone member countries. As a result, there are no quick fixes, and the concern must be of eurozone stresses resurfacing over the coming months.

As the Bank of England noted in its August Inflation Report, the eurozone represents a key source of potential vulnerability for UK economic prospects. Given the importance of EU markets for UK exports and the inter-dependence of our financial markets, there are numerous channels by which the UK could be impacted.

The Bank notes that funding costs for banks have risen and wholesale term issuance in public markets has weakened in recent months, reflecting in part the heightened stress in the eurozone area.

As June's Financial Stability Report noted, UK banks have made good progress in meeting their term funding targets for this year. But it is currently more difficult for banks to raise new money through RMBS, covered bonds and other bond instruments. If the deterioration in funding conditions persists, it will become harder for banks to deal with the significant funding challenges still facing them, not least the large amount of term funding, including funding supported by the official sector, that is due to mature before the end of 2012. This would in turn have the potential to adversely affect the future availability and cost of loans to UK households.

Understandably, our newspaper headlines have been dominated by the worst riots in the UK since the early 1980s and associated worries about social cohesion, rather than the economic news.

Given that the UK authorities appear to be firmly back in control, there seems little reason to expect major lasting economic effects from domestic unrest, although it will undoubtedly unsettle household and business confidence short-term.

Second quarter economic growth – at 0.2% - was weak, although special factors such as the additional bank holiday depressed the headline figure, and the underlying position is moderately better.

But the UK is clearly in very weak recovery mode, with consumer-facing activity struggling in the face of declining household real incomes. With the eurozone also entering a pronounced soft patch in Q2 that may persist for some while, as well as the ongoing problems in the US, we cannot expect foreign trade to lift the gloom very much near-term.

The context for Chancellor Osborne's recent statement to the Commons, underlining the government's "absolutely unwavering commitment to fiscal responsibility and deficit reduction", was to emphasise the "safe haven" status of the UK at a time of sovereign debt turmoil. Despite the rhetoric, we do not see this being at odds with a degree of fiscal flexibility, should economic weakness persist, as the Chancellor himself chose to highlight this when interviewed on the Today programme in June.

More immediately, though, the Bank of England has become more dovish.

While the Monetary Policy Committee once again kept official rates on hold at its August meeting, this was the first unanimous decision on rates for more than a year. As the Inflation Report noted, the outlook for the global economy has deteriorated. This has meant downward revisions to the short-term growth profile of the UK, and weakened the case to withdraw some of the monetary stimulus. Inflationary pressures remain elevated - CPI climbed up to 4.4% in July from 4.2% in June – but these continue to be seen as largely driven by temporary factors.

While the Bank has not been as forthright as the US Fed, it has signalled that a materially lower path for interest rates looks compatible with delivering its inflation target.

Speculation in some quarters about renewed quantitative easing or a base rate reduction to ¼% look overdone, but we should clearly expect UK monetary policy to remain accommodative (that is, loose) for the foreseeable future.

Housing and mortgage markets

Meanwhile, conditions in the housing and mortgage markets remain broadly stable.

House prices are essentially flat, with both LSL/Acadametrics and RICS figures for July pointing to a moderately less negative picture than in recent months.

Activity levels remain a little disappointing, however, with RICS signalling flat demand and renewed signs of vendors holding off from putting their properties on the market. While the level of transactions reported by HM Revenue and Customs appears to have held steady, the underlying position has drifted downwards. Seasonally adjusted sales of 204,000 in Q2 are the weakest in the two years.

Recent mortgage lending indicators corroborate this trend.

We estimate that gross mortgage lending more or less held steady at £12.6 billion in July. This was 6% lower than a year ago and a little weaker than we might have expected on seasonal grounds.

The broad picture, as illustrated by our regulated mortgage lending figures for the second quarter, is that lending for house purchase is trailing below, and remortgage trending above, year-earlier levels.

We have also reported a strong pick-up in BTL lending – up by a fifth in Q2 to £3.5 billion – although most of this increase reflected higher remortgage activity. While lending to support house purchase by landlords was its strongest for three years, levels remain very subdued compared with a few years ago and buying by landlords accounts for only about 12% of aggregate market activity.

Cash-based property transactions appear to have dipped in June, both in absolute terms and as a share of overall market activity. It is unclear at this stage whether this reflects statistical noise, the gradual recovery in mortgage availability or investor nervousness about UK residential property.

Early indications are that house purchase lending in July was buoyed by seasonal factors, but the underlying picture looks stable at best and it is possible that we may see overall house purchase activity drift lower over the coming months.

Remortgaging continues to look positive for now, but is vulnerable to eurozone problems. If these persist, and materially disrupt wholesale funding markets, the recent improvements we have seen in lending appetite and LTV criteria may go into reverse.

CML Research

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The BBC's take on it:

http://www.bbc.co.uk...siness-14571313

Mortgage lending subdued but stable, lenders say

All the evidence suggests sales will stay low in the coming months Mortgage lending shows no sign of picking up, according to the latest figures from the Council of Mortgage Lenders (CML).

Gross new lending, for both house buyers and those remortgaging, fell by 1% in July to £12.6bn.

That was also 6% down from the figure for July last year.

The CML described the property market as "subdued, but pretty stable" and warned that sales might fall in the coming months.

The CML's chief economist, Bob Pannell, said: "Underlying house purchase activity may drift lower over the coming months.

"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," he added.

'World away' Last week the governor of the Bank of England, Sir Mervyn King, warned that the UK economy would grow at a slower pace than previously expected.

And the minutes of the latest meeting of the Bank's Monetary Policy Committee, published yesterday, indicated that its members showed no enthusiasm for a rise in interest rates in the short term.

Peter Rollings, of estate agents Marsh & Parsons said: "Lending remains a world away from the level we need to see for the national housing market to pick up steam again."

"Despite the recent improvement in mortgage rates, demand for mortgage finance is still being thwarted by overly strict [lending] criteria," he added.

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  • 334 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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