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Gross mortgage lending subdued in December

21 Jan 11

Gross mortgage lending subdued in December

Gross mortgage lending in December was an estimated £11.0 billion, according to the Council of Mortgage Lenders. This represents a 6% drop from £11.7 billion in November. December was the fourth month in a row where the monthly outturn has been the weakest since 2000 (£10 billion).

The figure is 18% lower than £13.3 billion in December 2009, although comparisons are distorted as some households brought forward house purchase activity in the closing months of 2009 to take advantage of the stamp duty concession expiring at the end of the year.

Lending totalled £34.4 billion in the fourth quarter, down from £37.9 billion in the previous quarter and 11% lower than the last three months of 2009 as a whole (£38.7 billion).

For 2010 as a whole, lending totalled £136.3 billion, slightly above our annual forecast of £135 billion. However, this is down 5% from £143.3 billion in 2009 and the lowest annual total since 2000 (£119.8 billion).

In the CML’s monthly market commentary published today, the CML acknowledges that recent inflationary pressures have increased the possibility of a rate rise sooner than previously expected. However, the CML observes that most of the leading indicators show that the UK growth rate can be expected to slow markedly in the first half of this year, and the CML therefore expects that even if there is a rise, the base rate is unlikely to exceed 1% this year.

CML economist Peter Charles says:

“Money market rates have recently moved higher in anticipation of a rise in base rate and some lenders have recently reflected these increases in their product pricing. Against this backdrop, consumer demand may be weaker than we would otherwise have expected. Higher interest rates will also hit the budgets of existing borrowers, although the expected modest rises in base rate will result in a relatively small proportionate rise in monthly payments for most mortgage holders. Consequently we believe there will be little change in the level of arrears this year, and we do not anticipate revising our current arrears forecast.

Notes to editors

1. The Council of Mortgage Lenders' members are banks, building societies and other lenders who together undertake around 94% of all residential mortgage lending in the UK. There are 11.4 million mortgages in the UK, with loans worth over £1.2 trillion.

2.  The Council of Mortgage Lenders does not publish statistics for mortgage approvals. The data in our monthly Regulated Mortgage Survey and gross lending press releases relate to mortgage advances only. A mortgage approval is the firm offer to a customer of a specific amount of credit secured against a particular property. A mortgage advance is the total amount of loan actually provided to the buyer, by the lender.

3.  Next month’s gross lending press release and market commentary will be published on 18 February 2011.

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