Borrowing at a 10-year low

MORTGAGE lending in the UK hit a 10-year low in August falling to £11.4bn, down 14 per cent from £13.3bn in July, the Council of Mortgage Lenders (CML) said yesterday.

The figure was also down six per cent from £12.1bn in August 2009 with the CML warning lending levels were likely to remain subdued until the end of the year.

CML chief economist Bob Pannell warned: “We face a difficult second half of the year. However, the Bank of England is likely to keep interest rates at record lows for longer to support the economy. This will continue to alleviate payment pressures for many borrowers.

“The rise in prices has unsurprisingly run out of steam as a result and some indicators point to modest falls. While the various measures tell slightly different stories, our reading of the situation is that there has been little significant change since the start of the year. Demand is subdued and there are signs of more property coming onto the market following the abolition of home information packs.”

The CML figures came as the Bank of England’s Trends in Lending report, also published yesterday, showed UK net mortgage lending slowed to £0.1bn, while gross mortgage lending remained static and remortgaging continued to be weak. Generally, the report noted credit conditions would remain tight for several months to come.

Pannell said that, while there were a few more mortgage products available, “the upcoming need for some firms to repay the various support schemes, and replace this with more expensive market funding, means access is unlikely to improve in the immediate future.”