Gross lending drops 10% in November

18 December 2009 | By Robert Thickett

It says that this was also a 14% drop on the £13.9bn in gross lending seen this time last year.

The trade body says that a modest seasonal decline between October and November is typical, but the 10% fall is a little larger than normal.

Paul Samter, economist at the CML, says there is no sign of a swift recovery in lending volumes, especially with remortgaging set to remain at subdued levels while low interest rates persist.

The underlying story is one of market conditions holding steady and the CML does not expect this position to change much in the coming months.  

He says: “There is little reason to expect much underlying change in the coming months.

“There could be a modest decline in underlying house buying activity in early 2010 due to the Stamp Duty holiday ending, with activity ‘bunching’ over the last few months of 2009. But seasonal factors are likely to be the dominant driver over the next few months.
 
But he adds: “There has been a modest increase in the availability of mortgage credit recently, including some tentative signs of a few higher LTV products emerging.”

Brian Murphy, head of lending at the Mortgage Advice Bureau, says that it’s hard to read too much into the seasonal data, and says that no clear trends on lending volumes will emerge until at least a few months into 2010 when the seasonal lull is behind us.

He says: “One trend that is clear, though, is that more and more borrowers are choosing variable rate mortgages over fixed rate mortgages.

“Borrowers believe that the low interest rate environment is here to stay, and that even if rates were to rise by 1%-2%, the increase in monthly repayments can be comfortably accommodated and still represents better value than the most competitive fixed rate deals on the market.

He adds: “Our latest figures show that variable rate mortgages made up 53% of all mortgage transactions in November, compared with 43% in October.

“The percentage of fixed rate mortgage transactions has fallen dramatically from a high of 90% in May this year to a low of 47% in November.”

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