Mortgage lending at 12-month low

For sale signsMortgage lending fell to a 12-month low in April as the market suffered a hangover from the ending of a tax concession for first-time buyers.

The Council of Mortgage Lenders (CML) estimated that £10.2 billion was lent last month, down 19% on the previous month as people brought forward purchases to March in order to qualify for a stamp duty concession.
The organisation, whose members undertake about 95% of all residential lending, said the mortgage market has been "relatively buoyant" in recent months but warned over the potential impact of the eurozone crisis.

Chief economist Bob Pannell said: "The underlying picture is likely to be one of easing momentum in the housing market, but with potential for a sharper downwards correction on bad eurozone news."

The CML mortgage lending figure was higher than the £10 billion recorded for the same month a year earlier but was still well down on the peak for last year of £13.6 billion, which was achieved in September.

Banks and building societies have been increasing the cost of new mortgages and tightening lending criteria in recent months because the eurozone crisis has resulted in tighter conditions in wholesale markets.

And Bank of England Governor Sir Mervyn King warned last week that households were likely to suffer from higher borrowing costs as a result of banks looking to protect their balance sheets.

Howard Archer, chief UK economist at IHS Global Insight, said: "Housing market activity is very low compared to long-term norms.

"And the economic fundamentals currently look worrying overall for the housing market with unemployment high, earnings growth muted, and the outlook highly uncertain."
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