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January’s fall stifles hopes of lending rise

Hopes of an increase in mortgage lending in 2011 were dashed last week as it was revealed gross mort-gage lending fell 13% in January from December’s figure.

Gross mortgage lending fell to an estimated £9.2bn in January from £10.6bn in December 2010.

The figure is 5% up on January 2010 when there was £8.8bn of gross mortgage lending.

But the Council of Mortgage Lenders says comparisons with the beginning of last year are distorted because some households brought forward house purchases in the closing months of 2009 to take advantage of the Stamp Duty concession that expired at the end of that year.

Eric Stoclet, chief executive officer of Crown Mortgage Management, says lending will not improve until the economy is healthier.

He says: “As much as the government hopes mortgage lenders will take the lead in a housing market recovery, lenders can hardly ignore what’s going on around them. That’s just bad business.

“Until the questions about the economy can be answered, we aren’t going to see mortgage lending pick up significantly.

“This means that the property market is likely to remain subdued in the medium term, putting borr-owers with tight finances at greater risk of falling into negative equity.”

David Whittaker, managing dir-ector of Mortgages For Business, says the figures highlight how important the private rental sector is going to be in the next few years.

He says: “Until the mortgage market opens fully to first-time buyers it will continue to stagnate, leaving hundreds of thousands of people pouring into the rental sector.

“Luckily the buy-to-let market is showing improvement and will go from strength-to-strength this year as landlords capitalise on flat house prices and rising rents.

He says it remains to be seen whether landlords will be able to keep up with the demand.

Peter Charles, economist at the CML, says even if there is an up-turn in mortgage demand, lending will remain constrained.

He says: “As a greater degree of equilibrium is restored to financial markets, the availability of funding for mortgage lending should im-prove from current levels to support more normal levels of activity.

“However, the unprecedented expansion of wholesale funding, and hence mortgage lending, exper-ienced in the mid-2000s is unlikely to return.”

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  • peter stimson 24th February 2011 at 9:39 am

    what FTBs need are two things:- (1) an unwinding of house prices and (2) linked the the first point, more property to be built in areas of demand.

    lending higher LTVs, shared ownership etc are not resolutions to the issue but avoidance.

    On point 1, the funding issues banks are facing togther with tougher regulatory regimes and capital requirements will mean many (5+) years of near zero or negative HPI. Don’t forget, it took the banks 7 years to get into this mess (2000 was the approximate point of assets and liabilities matching) through reckless borrowing and lending and 7+ years will be the point at which they can address the fundamentals – no quick wins for anyone i can see but a slow, painful, gradual unwind

  • Daniel 21st February 2011 at 7:22 pm

    Suggestion for your ‘Poll – What needs to be done to help first-time buyers?’ on the left – add “Let house prices fall to reasonable levels” … as it is I cannot click any of your current options.

  • Henry 21st February 2011 at 7:05 pm

    I’m a first time buyer and I find your poll insulting. Why are people ignoring what first time buyers truely need? The one thing that is staring everyone in the face, for house prices to be lower.
    Its because no one has the interests of the first time buyer at heart. Just their own vested interests!

  • Henry 21st February 2011 at 7:04 pm

    I’m a first time buyer and I find your poll insulting. Why are people ignoring what first time buyers truely need? The one thing that is staring everyone in the face, for house prices to be lower.
    Its because no one has the interests of the first time buyer at heart. Just their own vested interests!

  • Nick 21st February 2011 at 4:41 pm

    “Hopes of an increase in mortgage lending”?
    To keep houses at these ridiculously high prices, I suppose.