Mortgages remain in the doldrums as recovery fears grow

The mortgage market remains subdued and some onlookers are beginning to ask whether it will ever return to pre-crash levels.

Figures from the Council of Mortgage Lenders, the trade body for banks and building societies, show lending actually picked up a little in June compared with the previous month.

Total loans to homeowners of £12.9 billion were made, up 16% on the amount lent in May. But that's still down 3% on June a year ago.

The CML said the subdued state of lending reflects the poor condition of the economy and household finances. CML chief economist Bob Pannell said: "The UK economy continues to experience disappointing economic growth, strong consumer price pressures, falling disposable incomes and an uncertain jobs market."

Matt Hutchinson, director of flat and house share website, Spareroom, said: "Mortgage volumes remain very low by historical standards but the question is, will they ever return to their former levels?

"There has been a paradigm shift within the property market. Not only, for many people, is property simply unobtainable due to the size of deposit and impeccable credit history now required, but more fundamentally it no longer holds the attraction it once did."

Howard Archer of IHS Global Insight notes: "There is little sign of a significant summer pick-up in housing market activity.

"Ongoing sluggish housing market activity underpins our belief that house prices will fall by around 5% from current levels by mid-2012 and end up around 10% below their peak 2010 levels."

These figures may not apply in London, observers note.