Mortgage lending falls to a ten-year low

Mortgage lending fell to a ten-year low in January as the market was hit by the ending of the stamp duty holiday late last year.

Lending declined to £9.1bn in January, a 32 per cent fall from £13.4bn in December, according to the latest figures from the Council of Mortgage Lenders (CML).

While a seasonal fall is typically experienced between December and January, the CML said this is the lowest monthly total since February 2000 when gross lending was £7.9bn. It is the lowest January total since 2000.

“We remain in a period of uncertainty for the housing market and economy at large,” says Paul Samter, economist at the CML. “The market certainly improved over the second half of last year and started 2010 in better shape than most would have predicted twelve months ago.”

But Samter says recent developments in the market have been influenced by the end of the stamp duty holiday and are likely to foreshadow a “larger than usual” seasonal drop off in activity in the early part of this year.

Figures from the CML show how the end of the stamp duty holiday for properties worth between £125,000 and £175,000 has “distorted” the profile of activity. Its monthly lending data showed a 56 per cent jump in the number of mortgage advances for properties in this bracket in December - against an 11 per cent increase in transactions across the rest of the market.

Samter says the general election will also create uncertainty over the spring and slow activity. “It will be difficult to gauge the true underlying state of the market for some time and the next few months are unlikely to add much to our reading of developments,” he warns.

But some commentators are more positive on the outlook. Nigel Lewis, property expert at FindaProperty.com believes the figures are likely to pick up again as the year progresses.

“That will be driven by the increasing number of properties coming onto the market as more people move,” he says. “In some regions the number of new homes being loaded onto our site has doubled in recent weeks, so the expected New Year surge in activity is emerging.”