Gross mortgage lending subdued in December

by Aaron Strutt

Jan 24 2011

Gross mortgage lending in December was estimated at £11.0 billion, according to figures released by the Council of Mortgage Lenders (CML).

This represents a 6% drop from £11.7 billion in November. December was the fourth month in a row where outturn has been the weakest since 2000 (£10 billion). The figure is 18% lower than £13.3 billion in December 2009, although the stamp duty concession is likely to have distorted the figures as some house purchase activity was bought forward to avoid paying the tax. Lending totalled £34.4 billion in the fourth quarter, down from £37.9 billion in the previous quarter and 11% lower than the last three months of 2009 as a whole (£38.7 billion).

For 2010 as a whole, lending totalled £136.3 billion, slightly above the CML's prediction of £135 billion. However, this is down 5% from the £143.3 billion in 2009 and the lowest annual total since 2000 (£119.8 billion).

In the CML's market commentary released today, they acknowledge that recent inflationary pressures have increased the possibility of a rate rise sooner than previously expected. Although, if base rate does rise, they do not expect it to exceed 1% this year.

CML economist Peter Charles, says: "Money market rates have recently moved higher in anticipation of a rise in base rate and some lender have recently reflected these increases in their product pricing.  Against this backdrop, consumer demand may be weaker than we would have expected. Higher interest rates will also hit budgets of existing borrowers, although the expected modest rises in base rate will result in a relatively small proportionate rise in monthly payment for most mortgage holders. Consequently we believe there will be little change in the level of arrears this year, and we do not anticipate revising our current arrears forecast."

Friday 21, 2011