Market slowing, say experts

Lending in May reached re-cord highs but lending trade bodies still say the housing market is slowing down.

The Council of Mortgage Lenders says gross lending reached a new May record of £30.6bn.

This is up by 12% on April’s figure and up 5% compared with the same month in 2006, when lending hit £29bn.

The Building Societies Ass-ociation also reports a rise in lending for May, with gross advances totalling £4.64bn – up from £4.61bn in May 2006. Gross advances in April am-ounted to £3.77bn.

But both the trade bodies say lending growth is down year-on-year.

Michael Coogan, director-general of the CML, says: “Although the lat- est lending figures represent a record for the month of May, they nevertheless indicate that the market is slowing down compared with the rapid and sustained growth we saw last year.

“We expect lending to ease as we move through this year, but the market will remain in good shape.”

He adds: “Although further interest rate rises will continue to dampen de-mand, we are still on course to meet our prediction of a record £360bn of lending in 2007.”

Adrian Coles, director- general of the BSA, says: “It’s been a slow start to the summer. Society mortgage lending is down year-on-year as the interest rate rises we have experienced since last August have started to take the heat out of the mortgage market.

“We are likely to see more subdued lending as this year progresses and the rate rises continue to feed through. An-other rate rise soon would exa-cerbate the slowdown later in the year and into 2008.”

He adds: “But a reasonably strong economic outlook, especially continuing robust employment, should support lending and property prices.”