Figures released in late October by the Bank of England show some worrying signs for the housing market. These are the bank’s figures for September, which show that mortgage lending totalled just £112m during the month – a massive 90% fall on the £1.62bn that was loaned out in August. The number of mortgages approved fell for the fifth consecutive month to 47,474, which is the lowest level since February.
Data published a few days earlier by the Council of Mortgage Lenders (CML) put gross lending for September at £12bn, down from £12.1bn in August and 7% lower than in September 2009. This represents a ten-year low, going back to September 2000, when gross lending was just £10bn.
Unsurprisingly, the lowest level of mortgage lending in a decade has caused fresh pessimism in the market as many analysts predict big price falls. Government cuts to spending and the public sector have clearly deterred buyers and sellers alike in a month that traditionally sees an autumn pick-up following the quieter summer month of August.
The head of lending at the mortgage broker Mortgage Advice Bureau, Brian Murphy said: “September’s figures are a shocker – down on August, usually the quietest month of the year, down on last September when we were still in the grips of recession, and no sign of the traditional post-summer bounce in mortgage activity, which doesn’t bode well for the rest of the year and early 2011.”
Commenting on behalf of the CML, Director General Michael Coogan said: “Lending volumes do not seem likely to increase substantially towards the end of the year. Funding pressures on lenders remain, and the practical implications of government and public spending cuts are beginning to emerge, with a resulting impact on consumer confidence.”
After the Government spending review, brokers had been braced for a slow autumn but the latest figures have taken most by surprise. This has lead to predictions of a “long hard winter” and potential price falls of 10% by certain brokers. The CML notes that although more property has come to market, the demand for property has fallen away due to an uncertain financial future.