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November’s gross lending hits 10-year low

Gross mortgage lending in November was an estimated £11.1bn, a 5% drop from the £11.6bn in October and the lowest November total since 2000, show the latest figures from the Council of Mortgage Lenders.

The trade body says the November figure is 10% lower than the £12.3bn advanced in November 2009.

As the lowest November total since 2000 – £10.9bn, this is the fifth consecutive month where gross mortgage lending has been at its weakest since the equivalent month in 2000.

Bob Pannell, chief economist at the CML, says: “The fall in gross mortgage lending in November reflects the usual seasonal slowing of activity at this time of year, and reinforces the picture of a continuing flat market. Comparisons with the year earlier are somewhat distorted, as some households brought forward house purchase activity into the closing months of 2009 to take advantage of the Stamp Duty concession.

“But both demand for mortgage borrowing and the supply of funds for lending remain heavily constrained.

“The CML market forecasts published last week suggest that gross mortgage lending in 2011 is likely to remain at similar levels to this year. We estimate gross mortgage lending for next year will total around £135bn.”

Brian Murphy of independent mortgage broker, Mortgage Advice Bureau, says: “The November gross mortgage lending figure is understandably distorted against the same month last year but there is no distortion to explain away the weakest November for 10 years. That’s just a reflection of the weakened state the market is in.

“Demand is very weak at present for obvious reasons. People are worried about the economy, their jobs, their spending power, which is being eroded by rising inflation, and interest rate rises, which may come sooner than we would like if inflation rises further. This is a brutal winter for the mortgage market.

“With the almost month-on-month reduction in fixed rate pricing during 2010, and the protection fixed rate products offer against interest rate rises, almost two thirds of borrowers gravitated towards fixed rates last month.

“Average 5-year fixed rate deals fell slightly to 5.29% from 5.32% last month and 2-year deals also edged down a little further to 4.37% from 4.48% the previous month.

“Trackers also continue to offer great value with the average 2-year tracker down to 3.46%. And with products that allow borrowers who choose to take advantage of lower tracker rates in the short term but with the facility to switch into a fixed rate without penalty if rates do start to edge up, these borrowers have the best of both worlds.”

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