Mortgage lending rose 6% in October but slowdown is threatening

Permalink: Mortgage lending rose 6% in October but slowdown is threatening
by Kay Murchie

Figures released from the Council of Mortgage Lenders (CML) show gross mortgage lending increased from £30.6 billion to £32.4 in September.

However, CML said the gains are from a time before the lending market began to suffer from the sub-prime issues connected with the credit squeeze and lenders are predicting a slowdown. Michael Coogan of the CML said the next few months will be a challenging time as ongoing pressures in financial markets filter through into the wider economy.

The CML expects lending to fall over the longer-term which is in accordance with figures from the Bank of England which show the amount of mortgage approvals fell in the third quarter of 2007.

Mr Coogan added that funding restrictions will continue to limit lending activity and make loans more expensive.

In its quarterly Inflation Report last week, the Bank of England said it had become more concerned about the slowing pace of the economy following the turmoil in the world’s credit markets, comments that analysts have said point to lower interest rates over the next few months.

A reduction in rates early next year should provide some relief for borrowers said Mr Coogan.

David Stubbs of the Royal Institution of Chartered Surveyors, said the ongoing slowdown in the market, buoyant economic conditions are still encouraging people to take out mortgages and purchase homes. Indeed, despite the withdrawal of many mortgage products from the market, those with solid earnings and the necessary deposit are still gaining access to mortgage funding.

However, lending volumes are set to trend lower in the next few months. An economic slowdown is underway and the housing market is losing momentum, Mr Stubbs concluded.