Mortgage lending falls

Gross mortgage lending decreased four per cent from September, down to an estimated £13.1bn in October, said the Council of Mortgage Lenders (CML) today.

Though there was a 13 per cent increase from October 2010, up from £11.6bn, housing market activity is still low compared to long term averages, industry experts said.

Housing prices are likely to decline by about five per cent in the coming months, due to a weak labour market, squeezed purchasing power and a worrisome overall economy, according to Howard Archer, chief UK and European economist for Global Insight.

“While mortgage activity has moved up modestly from its early-2011 lows, there remains little sign of a really significant step up,” Archer said.

“And there is significant concern that banks’ future ability to lend to home buyers could be hit by difficult wholesale funding conditions.”

Mortgage lending is still far lower than before the financial crisis in 2008. Gross mortgage lending was £60.7bn in the third quarter of 2008, compared to £39.4bn in the third quarter of 2011, according to CML data.

There are additional fears that “stagnation could turn into depression” in the housing market, said Nicholas Leeming, business development director at Zoopla.co.uk.

“Hopefully, the rumours that George Osborne will set out plans to underwrite first-time buyer loans in his Autumn Report will come to fruition. These are the buyers that lenders are reluctant to target,” said Leeming.

CML is an association of banks, building societies and other lenders who make up 94 per cent of all residential mortgage lending in the UK. There are currently 11.2m mortgages in the UK, with loans worth over £1.2 trillion.