Lending set to be lowest for 30 years in 2011

Wednesday 22nd December 2010

Fresh warnings have added to worries over next year’s housing market.

The Council of Mortgage Lenders has predicted that net lending in 2011 will fall to a 30-year low and figures from the Bank of England showing that in November, just 45,000 mortgage were approved, compared with 61,000 in November 2009.

In 2008, net lending was £40bn. Last year it was £12bn and this year it is predicted to be just £9bn.

The CML says the mortgage market will not recover to pre-crisis levels for “many years to come”.

Notorious bear Howard Archer, chief UK economist at HIS Global Insight, predicted that house prices will drop 7% next year but emphasised that prices are not the real problem: “Critical will be the amount of houses coming on to the market, mortgage availability, and how well the economy and jobs hold up, as the fiscal squeeze increasingly kicks in,” he said.

Mark Pilling, managing director of Spicerhaart Corporate Sales, said the mortgage market had deteriorated rapidly in the last six months.

He said: “The second half of 2010 saw a huge decrease in mortgage lending and November was no exception.

“Unfortunately, with the imminent ending of government support for financial institutions, lending does not look set to increase significantly in the near future. In fact, with the new mortgage rules to be introduced by the FSA, the lending environment is likely to get even tougher.

“Buyers will need a deposit of at least 10% in 2011, but unless they have a 40%-plus deposit, they will struggle to obtain a competitive mortgage under the banks’ current lending strategies. For the growing number of borrowers in negative equity, remortgaging to an affordable rate will be extremely difficult, causing some to default on their repayments and edge closer to repossession.”