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August mortgage lending hits ten-year low
20 September 2010
Gross mortgage lending fell 14% in August to an estimated £11.4bn, the lowest figure for the month since 2000, according to the CML. CML figures revealed that August mortgage lending was down sharply on July's £13.3bn and 6% down year-on-year from £12.1bn in August 2009. Lending volumes are likely to remain below last year's level in the coming months, the CML said, due to activity in the last few months of 2009 being buoyed by the end of the Stamp Duty holiday. Bob Pannell, chief economist at the CML, said: "The second half of 2010 was always going to be challenging. Looming public sector spending cuts are an inevitable brake on the economy in the short-term. The rate of growth in the second quarter will likely be a high point. "Meanwhile, the financial system is facing up to the need to move away from government support. The result is a more restricted flow of credit to the wider economy as balance sheets adjust - always a prolonged process." He added that the more downbeat tone to recent economic data and commentary was unsurprising and likely to continue, but added: "It does increase the likelihood of the MPC being able to keep interest rates at record lows for longer to support the economy. This will continue to alleviate payment pressures for many borrowers." However, Pannell said that risks remain: "It is unclear whether the private sector will be able to pick up the slack from the imminent public sector spending cuts, potentially leading to a further rise in unemployment. We will find out more details about where the axe will fall in the spending review next month. "The spectre of highly prescriptive regulation also hangs over the market. As they currently stand, we believe the FSA's current proposals will unnecessarily exclude a number of borrowers from accessing credit even when overall conditions begin to improve. "Against this backdrop, there is unlikely to be a significant improvement in the housing and mortgage markets for some time yet." Published by Mortgage Solutions
