Mortgage lending falls 42%
Mortgage lending falls 42%
Monday 20th October 2008
Mortgage lending fell 42 per cent over the last year, as property prices slump and the credit crunch blocks borrowing.Data from the Council of Mortgage Lenders (CML) reveal gross mortgage lending stood at £17.7 billion in September, a decline of ten per cent from August and 42 per cent from September last year.
Although a drop in lending is traditionally seen between August and September, the current lending level is the lowest since January 2005 and the lowest September figure since 2001.
CML director general Michael Coogan said: “The mortgage market is open for business. But weakening consumer demand and ongoing funding constraints will dampen monthly lending figures for the rest of this year and into the first quarter of 2009.
"We estimate gross lending in 2008 will be around £255 billion (£363 billion in 2007) and net lending of around £40 billion (£108 billion in 2007)."
This fall in lending will take the mortgage industry back to levels last seen in 2002.
"Another month, another awful set of mortgage data," said Howard Archer, chief UK economist at analysts Global Insight.
"The extremely low level of mortgage activity in September shows that housing market activity continues to be hammered by the highly damaging combination of extremely tight lending conditions and still stretched buyer affordability."
He added the weak CML data combine with the Rightmove figures that show a 4.9 per cent fall in asking prices.
"It seems particularly unlikely in the current environment that houses will be sold unless they are extremely competitively priced. Rightmove also reported that the average number of unsold properties per estate agent edged down to 76 in October from 78 in September.
"However, this was still very high by historical norms and was primarily due to a lack of new sellers coming onto the market."
He now predicts house prices to fall by 16 per cent overall in 2008 and by a further 15 per cent in 2009 – a 29 per cent drop in nominal terms from their August 2007 peak of £199,612 on the Halifax measure to stand at £140,774 at the end of 2009.
"Reduced falls in house prices are expected in the first half of 2010, taking them down to a low of £133,736, which would be 33 per cent below their August 2007 peak. House prices are then seen flattening out in the latter months of 2010," Mr Archer concluded.
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