Mortgage lending falls £13.5billion

19 February 2009 / by Rachel Mason
Gross mortgage lending has fallen £13.5billion in a year and more than £1billion in the past month, according to the latest figures from the Council of Mortgage Lenders.

In January 2008, mortgage lending stood at £25.9billion, by January 2009 it had fallen by 52 per cent to £12.4billion.

In just a month - from December 2008 to January 2009 - the decline was eight per cent, from £13.5billion to £12.4billion.

The CML says that although a slight decline is normal between December and January, the fall marks the lowest monthly total since April 2001.

The decline to £12.4billion this month means the drop since the mortgage lending peak in Q3 of 2007 is 87 per cent – a drop of more than £86billion, from £98.5billion.

Bob Pannell, head of research at the CML is unsurprised by the figures and says it would be unrealistic to expect recovery anytime soon.

"Mortgage lending activity continues to be very weak and while people are searching eagerly for some signs of recovery, it would be unrealistic to expect a meaningful revival in lending in coming months," he said.

Mr Pannell warned that even when things do start to recover, the mortgage market will not see the affects straight away.

"Even when conditions do improve, gross lending will be one of the later measures to recover," he said.

The figures come as depressing news for many first time buyers who are itching to get on the housing ladder but finding themselves unable to secure a first time buyer mortgage deal.

Despite the fact that the Bank of England has cut interest rates to just one per cent from five per cent in October, the mortgage market has remained tough.

Not only are mortgage lenders refusing to pass on rates in many cases, but most have decreased the Loan To Value on their mortgages, with the 10 per cent deposit deals that were so common a year ago now almost non-existent.

Peter Bolton King, chief executive of the National Association of Estate Agents says that their figures show that there is still a huge demand for property from first time buyers, who are increasingly visiting estate agents, registering their interest and searching for property but simply cannot get a mortgage deal.

"They are being frustrated at the final hurdle because lenders are not making mortgages available," he said. "First time buyers are crucial not only to the housing market, but the entire economy. More must be done to help them."

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