Home Lending Falls By 7% in 2010

by Mark Johnston

New figures paint a dismal picture of current mortgage lending in the UK. The report shows that lending by the leading Banks and Building Societies is at its lowest levels for eleven and a half years.

The data shows that potential buyers are not returning to their previous levels as they stay well clear of the current housing market.Net lending fell by £880 million during December strips out redemptions and repayments and is the lowest level its been since the 90’s way back in June 1999.

The outlook for 2011 is pretty dismal with just under 29,000 mortgage being approved during last month. The falls in December ended a pretty dismal year which ended £20 billion down from previous years lending. The fall in lending figures has been a direct result of the recent financial crisis. Many banks and building societies have reduced their lending to try and sure up their balance sheets whilst others have tightened up their lending criteria in an attempt to reduce the risk in the mortgage book. This has had a knock on effect which has seen lending fall and house prices drop over the past year.

A recent report by the British Banking Authority (BBA) has shown that their has been a 44% fall in new business for mortgage application but at the same time they have pointed out that the main high street banks have been very much open for business. Major banks and building societies have taken a larger share of the market from some of the smaller players and specialist lenders.

David Dooks, director of statistics at the Bristish Bankers Association said: “The main banks’ net lending rose by £20 billion in 2010, in contrast to lending by all other lenders, which decreased by around £12 billion.However, mortgage demand was weak throughout the year, with 10% fewer loans approved than in 2009.”

Howard Archer the chief UK and European economist at IHS Global Insight, said: “The BBA data point to the housing market ending 2010 very much on the back foot, where we expect it will remain for much of 2011.Housing market activity remains stuck in the doldrums, which seems highly likely to maintain downward pressure on prices.”

Recently the Council of Mortgage Lender (CML) released a report that showed that the total mortgage lending by all the banks and building societies in the Uk had dropped to their lowest levels in ten years to a pitiful £136.3 billion

A further report from the Bristish Bankers Association (BBA) highlighted that borrowers looking to remortgage fell to just less than 25,000 which was 7% lower than previous years. Borrowers looking to take advantage of the equity in their homes also fell by 12% with just 15,262 looking to take out a home loan of this type.

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