UK property lending slumps in November and set for slow start in 2010

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Mortgage lending in the UK in November was down 10% from October, the first drop since August, according to the latest data published by the Council of Mortgage Lenders.

Although small seasonal drop is typical, there is some concern that the 10% difference between £12 billion gross mortgage lending in November and the £13.3 billion in October is more than usual.

The last time lending fell was in August, when it was down 13%, however the fall was explained by seasonal factors. After adjusting for seasonal factors, November’s was the first month on month drop since June. November’s figures were also 14% down from the £13.9 billion recorded in the same month in 2008.

The CML is predicting a quiet start to mortgage lending in 2010, due to the end of the stamp duty holiday announced in the pre-budget report. ‘There could be a modest decline in underlying house buying activity in early 2010 due to the stamp duty holiday ending with activity “bunching” over the last few months of 2009. But seasonal factors are likely to be the dominant driver over the next few months,’ said CML economist Paul Samter.

“There has been a modest increase in the availability of mortgage credit recently, including some tentative signs of a few higher LTV products emerging. But there is no sign of a swift recovery in lending volumes, especially with remortgaging set to remain at subdued levels while low interest rates persist,’ he added.

In a separate report the Bank of England said that growth in lending was set to be ‘muted’ next year, raising concerns that the recent recovery in the housing market may not be sustainable.

‘Looking forward, the major UK lenders expect a muted recovery in secured lending in 2010, with unemployment, house prices and the path of the bank rate expected to be significant factors determining the outlook,’ the report said.

However, on the plus side Samter added that with the labour market performing better than feared and lenders apparently working with borrowers who are struggling to afford repayments, there should not be a sharp rise in repossessions.

 

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