Gross mortgage lending fell 13% to an estimated £9.2bn in January from £10.6bn in December, the Council of Mortgage Lenders has reported.
Peter Charles, economist at the CML, said: “The Bank of England’s inflation report noted that the UK banks face a significant funding challenge over the next couple of years.
“In total, including funding supported by the public support schemes, around £400bn to £500bn of wholesale term debt is due to mature by the end of 2012.
“This implies that, even in the unlikely event of a marked upturn in mortgage demand, the level of activity in the mortgage market can be expected to remain constrained.”
Commenting on the figures, David Whittaker, managing director of Mortgages For Business, said: “Imploring lenders to lend more this year will be as fruitful as asking Ed Balls to quieten down – it simply won’t happen.
“These figures highlight how important the private rental sector is going to be over the next few years. 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.”
Richard Sexton, business development director of e.surv, said: “The market is being driven by the behaviour of lenders – and many are compelled to consolidate their balance sheets rather than lend.
“But the figures don’t tell the whole tale. Approvals are actually up for the most expensive properties. Wealthy buyers are using large deposits and aren’t restricted by the availability of mortgage finance like the rest of the market.”
Eric Stoclet, CEO of Crown Mortgage Management, said: “With GDP shrinking, house prices dropping and the impact of public spending cuts still uncertain, lenders responded emphatically in January. You can’t disguise adverse lending conditions.
“Demanding that lenders put their hands deeper into their pockets misses the point.”
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Comments
Unfortunately Realising Reality (gauging by Shapps' rhetoric) it looks like price drops in real terms must be avoided at all costs.
Until then, we'll just have to wait for wage inflation to catch-up. At a current 1.8% per annum; it's going to take a wee while.
I wonder how many EA firms can hang on - with such low transaction levels - for, say, five years?
So, the whole of our economy now depends on house prices not falling? That doesn't sound good.
What if they need to fall because they have been pushed beyond affordable levels?
The answer is, banks and other lenders need to make sure they do NOT lend up to 95% or more of current values. 75% would seem to be the red line limit, for safety?
Prices will need to adjust to that. The sooner they do, the sooner we shall have movement at more normal trading levels - phew!
IR's wont go up because they are now dictated by the banks exposure to the housing market. i.e if rates go up, house prices collapse completely and banks/United Kingdom goes bankrupt. Expect rates to be 0.1% with another wave of quantitive easing and a recession Japanese style.
Feels like 2008 all over again, except this time IR's will be going up not down. Crashy crashy.