CML: Mortgage lending down 8%

Mortgage lending continued to fall during April, according to the latest statistics released by the Council of Mortgage Lenders (CML).

Research from the organisation – which represents 98 per cent of the mortgage industry – finds gross lending fell eight per cent in April, when compared to the same month last year.

Lending also fell five per cent when compared to March, leaving the gross lending figure for the month at £25.3 billion.

The CML explains a fall is typically expected from March to April. However, the fact that Easter was in March is likely to have affected the monthly profile this year.

For March and April combined, lending was down 16 per cent from 2007 levels.

"In the wake of the credit crunch, 2008 will be remembered as a very weak year in the housing market," said CML director general, Michael Coogan.

"But our forecasts assume some indirect benefits from the Bank of England special liquidity scheme beginning to have an effect in the mortgage market in the later part of the year.

"Over the next few months, lending volumes will get worse before they get better."

The CML now expects house prices to fall seven per cent over the course of 2008.

More worryingly for the market the body also predicts transaction levels will fall 35 per cent.

"Mortgage approvals, a good lead indicator of transactions, are continuing to sink and this gloomy environment is being backed up by much anecdotal evidence," said Royal Institution of Chartered Surveyors (Rics) chief economist, Simon Rubinsohn.

"This collapse in activity will not only have significant ramifications for the high street as spending on consumer durables declines but also HM Treasury as revenues from stamp duty fall away sharply."

Gross lending is expected to be around 21 per cent lower than last year, at £285 billion; while net lending will fall to half of last year’s level at £55 billion - according to CML predictions.

"The bad news on the housing market is pretty relentless at the moment, with the low level of mortgage activity being a consequence of a damaging mix of stretched buyer affordability and very tight lending conditions," explained Howard Archer, of analysts Global Insight.

"Elevated affordability pressures on potential housebuyers stemming from elevated house prices and modest real disposable income growth, while very tight credit conditions, are leading to markedly fewer and more expensive mortgages being available."

Earlier this week the Royal Institution of Chartered Surveyors announced it predicted house prices would fall five per cent this year, accompanied by a 40 per cent fall in transaction levels.

"The market is still very uncertain, but lenders are working hard to ensure that borrowers coming off fixed rates remain on track, that arrears and repossessions are minimised, and that pricing is as attractive as they can make it in a market where they must manage the demand for lending with caution," continued Mr Coogan.

The CML, however, predicts some 45,000 homes will be taken into repossession this year – up from 2007, but well below levels seen in the early 1990s.

Chris O'Toole