Net mortgage lending this year is likely to be just £6bn – the lowest annual total since 1980 – the Council of Mortgage Lenders has said.
The figure represents a fall of almost 95% from £108bn of net lending in 2007.
The CML says that it expects gross lending this year to remain static at around £135bn.
That figure is a 62% fall from the £363bn of gross lending in 2007.
Net lending is what borrowers actually owe their lenders – ie, after they have paid off some of the capital.
The CML says that net lending has fallen so dramatically for several reasons. It cites the low number of transactions – it is predicting 860,000 house sales this year.
The CML also cites the sharp decline in remortgaging. With final figures still to be produced for last year, it is possible that there were as few as 300,000 remortgages taken out in 2010 – compared with over one million in 2007.
A third major factor is a reduced appetite for borrowing among consumers, as they fight shy of taking on large-scale borrowing commitments against an uncertain economic backdrop.
The CML said: “Given this combination of circumstances, the particularly sharp decline we have seen in net lending – and the gap between our forecast of gross lending of £135 billion in 2011 and net lending of only £6 billion – is unusual, but not unexpected.
“In a market in which there are low levels of remortgaging, low levels of property transactions, and customers are unwilling or unable to increase borrowing, we should expect net lending to grow much more slowly than in more normal conditions.
“We may see periods of zero or even negative net lending – when overall mortgage debt declines – a situation that has existed for some time in the unsecured credit market.”
The CML also reported that gross mortgage lending in December was an estimated £11bn, a 6% drop from November’s £11.7bn and 18% lower than the December 2009 figure of £13.3bn.
Lending totalled £34.4bn in the fourth quarter, down from £37.9bn in the previous quarter and 11% lower than the last three months of 2009 as a whole (£38.7bn).
For 2010 as a whole, lending totalled £136.3bn, slightly above the CML’s annual forecast of £135bn. However, this is down 5% from £143.3bn in 2009 and the lowest annual total since 2000 (£119.8bn).
Paul Sabbato, a director of First 4 Bridging, said: “The near-paralysis of the mortgage market continues.
“There’s no doubt that many people who may have been considering buying a couple of months ago have shelved their plans until there is more clarity on when, and by how much, rates will rise. Higher inflation looks like it is going to force the Bank’s hand, and if that’s the case, then borrowing will come under further pressure.
“Consumer confidence isn’t just being undermined by the potential of rate rises. There’s also the small matter of rising unemployment and soaring living costs.
“If there’s a degree of risk in buying a home or taking on a bigger mortgage, more and more people are choosing not to take it. Consumers have never been so cautious.”
Comments
Mike. Some commendable points, but then you spoil it by commenting about property MUST fall? Why? Do I father from this that its the English disease of coveting something, but finding an easy way to get it.
What's missing from your picture is the fact that there is a massive undersupply of property in the UK and property is NOT as expensive in the UK as some would suggest.
What is missing though is people who are prepared to work like hell to get on the housing ladder at the bottom and work their way up, like the rest of us had to.
So many times now I see whingers complaining about not being able to buy a property, where both partners are working, but where they then spoil it by talking about how much a 4 bedroom detached house will cost them, as I have news for them. Very few of us in the past went straight into 4 bed. detached houses with integral garages.
Your right on tax though, and perhaps a flat tax would be more beneficial to our economy, as less and less money would be spent trying to avoid paying it.
But we should not get the impression that property is overpriced at present, as demand side considerations have to be relevant.
Do you really think that falling property prices is attractive for the UK economy? It's not you know.
Its healthy for property to rise, just like you'd expect wages to rise, just like with all the best will in the world, you can't buy gold at 1800 prices.
What is missing I'm afraid is the guts and determination and motivation for young couples to STRIVE to get on the property ladder because of increasing IDIOTS who have told them about their right to affordable accommodation, and where a growing sector of the population has taken this to heart, with no incentive or inclination to do anything but receive, knowing really well all of their rights, but not giving a hoot for their responsibilities.
You should hope property prices are maintained, because there is little doubt that we are going to see inflationary pressures on virtually everything else, and it would be ridiculous to suggest property should be a special case and drop when the demand is greater than ever, and likely only to increase.
Too many people get fooled into believing these 'trend' analysts, and where in my experience there is always one word that describes why these tipsters are doing what they do, whether it be to tip shares going up, or property going down. That word is PROFIT.
I remember the chants in the news when I bought my first flat at £25,000 that 'property was doomed to be stagnant for decades" (but where it doubled not so long afterwards). A real real struggle for my wife and myself to buy, but where such endeavours meant we really looked after and appreciated our little converted coal hole until we worked even harder to move up the ladder.
How many now want a four bed. detached house with integral garage as their initial target, and where I've noted how many news items use that cited to show unaffordability when its crazy to think of people being able to go straight to that sort of purchase unless they are extremely lucky.
The problem is not property prices, the problem is we have over the past decade or so inculcated into some their absolute right to receive subsidised accommodation, not even seeking decent behaviour to go with it, and where these 'affordable' homes, are nothing like affordable to UK Plc, as the hidden costs are just absolutely overwhelming, both in terms of damage, maintenance and the false idea perpetuated by the term 'affordable' that 'we pay our rent, so we demand new kitchens, bathrooms, plasma TV's, and replace the stuff we've damaged or our many pets damage, or where we are the only sector of the population allowed to breed'.
The problem is not property prices, its how we've demotivated our own society to one of demand feed culture, and why so much money is spent on it, but where anti social behaviour has increased not decreased.
We had the decent homes standard....FOR SOME, whilst some pensioners who had struggled to work their socks off to buy a little place, had no money to pay for replacement glass let alone decent standards, whilst those enjoying 'affordable' accommodation for giving what back exactly?
It's an interesting situation.
I would suggest banks have not got the money to lend ... the mad lending in the run up to the credit crunch depended on the use of financial instruments like Mortgage Backed Securities to, effectively, lend the same money over and over again. (One bank using a parcel of debt as security for a loan - and the lending bank using that security as security for another loan etc. etc.).
Now that that particular madness is behind us,, banks must be having to rely on savers' deposits to lend out. (Novel eh?) And with interest rates low and many savers having already removed their savings from the banking system (and bought property, many of them) - the time is approaching where banks simply have no money to lend.
Which means, of course, that house prices must and will fall - regardless of how determined banks and vested interests like Estate Agents still try to talk the market up.
A property crash will wipe out the banks - their capital ratios will be decimated by a property crash .... so, what is to be done?
The government are like rabbits in the headlights.
Estate agents are like rabbits in the headlights.
The banks are like rabbits in the headlights.
We need decisive action. Taxes must be SLASHED and borrowing temporarily increases.
The simple fact is that, throughout history, whenever taxes have been lowered, economies have grown, more money is spent and, abracadabra, MORE TAX is raised.
The course we are on at the moment is a slow crawl to disaster. Raising taxes is the LAST THING the economy needs at the moment.
Oh, and to keep borrowing down, the million people in the public sector in non-jobs like 'diversity co-ordinators' should be made redundant.
And, anyone in the public sector earning over 50k should have that portion of their salary over 50k halved. If they don't like it - leave and try to get a job with similar salary and perks in the private sector.
What else? No-one in the public sector to earn more than the PM. Vice chancellors of some universities are on 400k.