Property lending in the UK was more than fifth lower in January than a year ago, with loans plunging to a ten year low, the latest figures show.
Gross lending fell to £9.1 billion in January, a 32% fall from December levels and 21% lower than in January 2009, according to the Council of Mortgage Lenders.
While the council said it is normal for lending levels to fall between December and January, lending fell back to its lowest level since February 2000.
Separately, the Bank of England said lenders also reported that the severe weather around the year end had depressed mortgage approvals in January.
‘The larger than average drop between December and January this year confirms our view that house purchase activity was boosted in December by a number of borrowers trying to complete their purchase before the end of the year to take advantage of the stamp duty holiday,’ the CML said.
Its figures also show that there was a 56% jump in the number of mortgage advances for properties affected by stamp duty changes back in December, much higher than the 11% rise across the rest of the market.
Paul Samter economist at the CML predicted that the early part of 2010 will see a fall in activity as more deals were done in the last part of the year than is usual and the upcoming general election will also create uncertainty over the Spring months.
‘It will be difficult to gauge the true underlying state of the market for some time and the next few months are unlikely to add much to our reading of developments,’ he said.
But he added that the lacklustre recovery and uncertainty in the sovereign debt markets mean he expects only a gradual recovery in the housing market.
As banks will need to refinance £300 billion of wholesale funding provided under the Bank of England’s Special Liquidity Scheme next year, he believes funding costs will rise and that could keep a lid on lending to households and businesses.
Royal Institution of Chartered Surveyors senior economist Oliver Gilmartin described the figures as disappointing and said they underline the continuing difficulties facing the construction industry.
‘Housing completions in 2009 were the lowest since 1947 in England and the latest quarterly decline in housing starts offers little near term comfort. Furthermore, housing starts are running at more than 50% below what is needed to satisfy projected household growth according to the government’s own estimates,’ he said.
‘An urgent re-assessment of the procurement route for bringing housing to market is critical as market mechanisms have clearly not worked over the last two decades. Annual housing completions have averaged a paltry 148,000 dwellings since 1989, less than 20% of mortgages approved during a typical year,’ he pointed out.
‘With sharp cuts in public spending in the coming years, available public money for housing will have to be used more intelligently and there will need to be additional effort to ensure that private investment is brought into the market,’ Gilmartin added.
