Mortgage lending dropped back significantly in September, according to new figures which appear to confirm a slowdown in the housing market. Gross mortgage lending fell by almost 12 per cent between August and September, dropping to an estimated £30 billion, according to the Council of Mortgage Lenders (CML).
Although lending was up 2.5 per cent on the £29.2 billion reported for September 2006, the trade association said the monthly decline was larger than that traditionally reported at this time of year. The CML said the apparent "easing" of the housing market was a further sign that consumers had been hit by the five interest rate rises introduced by the Bank of England since August 2006.
"We have been expecting a slowdown in monthly lending levels in line with interest rate rises," said CML director general Michael Coogan. "In the coming months, we expect to see monthly lending levels dip below their 2006 levels for the first time this year as rate effects are exacerbated by the recent liquidity problems in the mortgage market," he added.
Separate figures released today by the Building Societies' Association (BSA) showed that mortgage lending by its members rose slightly in the month to September, but fell year-on-year. BSA director general Adrian Coles said: "It is clear that the impact of higher interest rates is continuing to dampen the housing market."
Additional data from the British Bankers Association (BBA) showed that net mortgage lending by its members rose by an underlying £5.8 billion in September, down from the £6.1 billion rise recorded in August. However the gain was still above the recent monthly average of £5.6 billion reported by the organisation.
Commenting on the figures Global Insight chief economist Howard Archer said that the data still presented a "pretty resilient" picture of the UK's housing market in the wake of the ongoing credit crunch and rising house prices. But he warned: "Going forward, housing demand seems set to lose significant momentum in the face of the financial market turmoil and the increasing affordability pressure on house buyers.
"Meanwhile, rising concerns about the overall state of the economy may well make people more unwilling to risk stretching themselves to buy a house," he added. The warning comes after the International Monetary Fund (IMF) hinted that the UK and other European nations could experience a sharp fall in house prices, similar to that experienced in the US.
In America the sub-prime mortgage market, which makes home-loans available to those on low incomes or with poor credit ratings, has all but collapsed in the wake of rising default levels. The crisis has also prompted the current global credit squeeze, with banks increasingly wary about who they lend cash to amid uncertainty about the extent to which they are exposed to bad debts in the sector.