Don’t play tug of war with lenders, warns CML

The Council of Mortgage Lenders is calling on the government to stop playing tug of war with lenders as the number of house purchase loans continues to plummet.

The latest data from the trade body shows that there were 39,000 house purchase loans in October worth £5.5bn. This represents a year-on-year decline of 52% in volume and 57% in value.

There were 70,000 remortgage loans worth £9.4bn during the month, a fall of 31% in volume and 28% in value since October 2007.

Michael Coogan, director-general of the CML, says lenders are facing conflicting demands including the pressure to recapitalise, affording leeway to struggling borrowers and offering competitive rates for both new borrowers and savers.

He says: “To different degrees lenders are facing conflicting pressures, while also having to ensure their long-term financial stability to help the UK economy rebuild itself.

“Current policy objectives are conflicting and incoherent. The government needs to decide on its key priority. The tug of war with lenders being pulled in every direction at once needs to end.”

He adds: “We believe the government urgently needs to review the cumulative effect of the approach it has taken in the recapitalisation process on large lenders’ willingness and capacity to lend.

“Ultimately the response of each lender – whether on commitments to follow base rate moves or to finance new business in the future – will depend on its access to and the price of its funding.”