Lenders say drop in lending is a one-off

Lenders have told the Bank of England that the recent falls in mortgage lending and approvals are down to one-off factors, though have admitted a lack of funding may constrain mortgage lending further.

The Bank has published its latest Trends in Lending report in which major UK lenders reveal their take on the lending market.

The report says: “In recent discussions, the major UK lenders reported that the recent slowing of mortgage lending and approvals reflected one-off factors.”

Lenders told the Bank that the removal of the Stamp Duty holiday and the severe weather at the start of the year were to blame for the drop in lending activity.

The Bank’s own evidence supported the view that the heavy snow of early January had prevented viewings and had stopped home owners putting their property on the market.

Data from the Royal Institution of Chartered Surveyors also pointed to the impact of the weather on new buyer enquiries.

The report adds: “A number of major UK lenders reported that underlying mortgage demand was little changed on the month.”

Lenders have also reported a gradual increase in the number of higher LTV products.

The Bank says this is consistent with its estate agent contacts who reported signs of a marginal easing in mortgage availability, though the lack of credit was still seen to be constraining housing market activity.

Several lenders said the lack of mortgage funding was a potential constraint on lending, especially for specialist mortgage lenders.

The Bank took the unusual step of featuring specialist lenders in its latest report.

A special section on the specialist sector revealed that specialist lenders accounted for just over 3% of total gross mortgage lending in December, compared to 18% in March 2007.

Figures published by the Council of Mortgage Lenders today show that in January gross mortgage lending fell 32% to an estimated £9.1bn, the lowest January total since 2000.