Lending Figures Fall as Government Announce Cuts

by Mark Johnston

New figures from September are showing that mortgage lending is the lowest it has been in the last ten years. This is yet another sign that the UK housing market is in trouble. Fears are growing that the UK will see a house price crash if things don’t change quickly.

The report shows that almost £12 billion was lent in the month of September which was 1% less than the month before in August. The Council of Mortgage Lenders highlighted that the last time figures were so low was back in September 2000.

Industry insiders are concerned that this is the second month in a row that lending fell and they are concerned that this may be the signal of the start of a crash in the UK housing market. Traditionally the housing market sees an increase in sales during the summer which has not materialized this year, this has further worried analysts concerned about the future of the market. The Council of Mortgage Lenders warned that its members were not expecting any increase in lending for the rest of the 2010 but are hoping to see improvements by the start of 2011.

Michael Coogan, director general of the Council of Mortgage Lenders, 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.”

Its not all doom and gloom though, although mortgage lending figures have been down for the past two months, the number of mortgage advances is actually up in the third quater of the year when compared to the first two quarters.

The third quarter saw £37. 4 billion in lending which was almost 10% higher than in the three months before. That said, the figures are still down when compared to the same period last year (September 2009).

The housing market has been somewhat subdued over the summer as many home owners stay putt in light of looming public sector cuts and public and private sector job losses. Hopefully today’s announcements by the government on how they budget deficit will be dealt with may give some the confidence they need to move home.

Home owners are still continuing to put their homes up for sale which has led to the market being swamped by new homes with no increase in buyers many or concerned that this will start to drive prices down and see the start of a market crash as UK home values go into freefall.

The mortgage lender Halifax reported a 3.6% fall in house prices last month which has trigged analysts to suggest that prices may fall by around 10% in the last quarter of the year..

Mr Coogan went on to say: “A concerted effort by borrowers, lenders, the Government and money advice agencies has helped to keep mortgage arrears and possessions in check during the current economic downturn. These support measures help contain the wider costs of homelessness, and deliver wider benefits to the Government. Now is not the time to weaken the existing safety net.”



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