Mortgage lending remains weak

The Bank of England's January Trends in Lending report showed that mortgage approvals for house purchases fell to a 21-month low of 40,000 in December from 45,000 in November 2010 and the last peak of 60,000 in November 2009.

Howard Archer, chief UK and Euopean economist at IHS Global Insight, believes the latest data suggests that housing market activity ended 2010 very much on the back foot and that house prices will remain under pressure in the early months of 2011 at least.

"This evidence of ongoing very weak housing market activity reinforces our belief that house prices will fall further in 2011, although current mounting signs of fewer houses coming on to the market could provide some support to prices.

"Thus we maintain the view that while house prices are unlikely to collapse, they will fall by around 10% from their peak 2010 levels by the end of 2011. Given that house prices have already fallen by some 3% on the Nationwide/Halifax measures, we believe that they will fall by around 7% in 2011."

Meanwhile, Nick Hopkinson, director of PPR Estates, said of the two sets of figures: "With gross mortgage lending in December 2010 at its lowest level this century it is clear the UK 'mortgage famine' shows no real signs of easing despite the marketing claims of the large banks.

"Unsurprisingly, lending to small businesses has also declined further in the last quarter too. Looking at the stats any claims by the lending banks to be trying to help businesses and individuals obtain essential credit to grow the economy remain empty words.

"Unfortunately, this has been a consistent theme ever since the Credit Crunch in 2008 which is unlikely to change until the banks have fully repaired their balance sheets.

"This will not happen in 2011 and could take several more years. The complex accounting which is all pervasive these days to hide losses and disguise risk makes accurate predictions around bank stability very difficult and only adds to the overall economic uncertainty."

More about

Your Comments

I'm not surprised that mortgage lending remains weak given the actions of lenders like the Nationwide. I applied for a Nationwide mortgage in August of last year and recently returned to them to ask for relatively minor further borrowing because of improvement issues with the property that only came to light after purchase. The Nationwide now tell me they introduced a new rule on 19 August 2010 that blocks any additional mortgage borrowing for 6 months after we completed on the property (despite the fact that our mortgage offer pre-dated this rule change and we were not informed of it at any stage in the process). If I had known this rule would apply, I would have taken a product with the RBS, who don't use such a rule. My complaint to the Nationwide that this was unfair -- essentially retrospective legislation that means I wasn't able to make an informed choice about the mortgage product -- was fobbed off.