CML: Mortgage lending up 11%

Mortgage lending in the UK economy increased by 11 per cent during January, to some £26.5 billion, according to the Council of Mortgage Lenders (CML).

The figure is an 11 per cent increase on the figure of £23.9 billion lent in December, and broadly in line with lending of £25.6 billion in January 2007.

According to the trade organisation – which represents 98 per cent of all residential mortgage lenders in the UK – this represents a strong performance for the month.

Typically lending slowing in January when compared to December, and the rise is even more positive due to the uncertain market conditions at the end of 2007.

However, gross lending volumes are expected to be lower in the coming months following a fall in mortgage approvals towards the end of last year.

"Gross lending held up well in January. However, there is considerable uncertainty in the housing market at the moment and we expect lending volumes to be lower in the coming months," said CML director general, Michael Coogan.

Warnings from the Royal Institution of Chartered Surveyors Rics, Halifax, and Nationwide all illustrate falling house prices are a real possibility for the foreseeable future.

"It is likely demand will be stronger for remortgaging than for house purchase in the short term," continued Mr Coogan.

"Homebuyers might be more inclined to transact if their moving costs were reduced and the government has the opportunity to address this by raising stamp duty thresholds and cutting the rates of stamp duty in next month’s Budget.

However, the figures cannot be interpreted in too positive a light, according to some analysts.

"It is really mortgage approvals that are more important as a leading indicator of where the housing market is headed, and latest available data show that these were very weak in December," said Howard Archer, of Global Insight.

"Indeed, the Bank of England reported mortgage approvals fell sharply further to a record low of 73,000 in December. This was the lowest level since records began in 1999, and was down from 81,000 in November, 99,000 in September and 113,000 in June.