Huge slump in mortgage lending in January
The Council of Mortgage Lenders (CML) has released data that reveals there was a fall of 29 per cent in house purchase lending in January.
A fall between January and December is expected but not to such a degree. According to the CML a combination of factors led to the extraordinary fall. The combination of rising inflation, tax measures, severe weather and uncertainty over the future of interest rates has led to a lack of movement in the mortgage market.
CML Director General Michael Coogan said: “Pressures on household budgets have been increasing both in terms of take home pay, and indirect tax measures such as the VAT increase and recent inflationary pressures, so we were expecting a fall in transactions early in the year, and a flat mortgage market underpins our forecasts for 2011.”
There were 28,500 loans advanced for buying a home in January 2011, a fall of 12 per cent on January 2010. This represents a substantial decrease as the figures from January 2010 were lower than normal because of the rush to complete purchases before the end of the stamp duty concession at the end of 2009.
The drop was not as pronounced for re-mortgages. The number of loans fell by six per cent in January from December to 22,100. Remortgaging increased its share of total lending from 27 per cent to 28 per cent over the same period.
The fall in house purchasing was split equally between first-time buyers and home movers, with a fall of 28 per cent for the former and 29 per cent for the latter. Lending rates have improved slightly as first-time buyers needed to borrow 80 per cent in January up from 77 per cent in December.
Howard Archer of IHS Global Insight said: "The very weak CML mortgage advances data for January indicates that the housing market started 2011 on the back foot and supports our belief that house prices are headed down further over the coming months," he said.
"Further bad news for the housing market is the now strong possibility that the Bank of England will start to raise interest rates within the next few months to counter above target and rising inflation."
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