Big Fall In Mortgage Lending in January

There was a 26% fall in mortgage lending in January according to figures from the Council of Mortgage Lenders (CML).

Mortgage lending fell heavily in January with 26% less loaned for house purchases compared to December.

Whilst a fall between December and January is to be expected, these figures are higher than normal and can be explained by a mixture of circumstances occurring at once.

The very bad weather in December and uncertainty over possible interest rate rises in 2011 deterred many house buyers but it was also the impact of government spending cuts and rising taxes that also contributed to an unwillingness to undertake new mortgages.

Whilst the lack of momentum in the mortgage market is of concern, there was some good news in the latest CML report, which showed that first time buyers borrowed 80% of their property’s value in January, compared to 77% in December.

This does indicate that mortgage lenders are starting to offer higher LTV mortgages, however the outlook for the property and mortgage markets remains gloomy as Michael Coogan, CML director general explains:

“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.”