Mortgage Lending Dives by 29 Percent in January 2011

Mortgage Lending Dives by 29 Percent in January 2011

by Rebecca Hall on 30 Mar, 2011

According to figures from the CML, mortgage lending in January was down 29% on December 2010. Although this ties in with the traditional yearly slump, this is 12% down on the year before, at a point where the market was considered subdued to say the least.

Although the headline issue in mortgage lending over recent months has been the difficulty in obtaining credit due to more stringent requirements, the dive is put down to demand rather than supply.

Household budgets face uncertainty thanks to the impending government cuts, and job security remains low. As such, many people are reluctant to commit to borrowing large sums of money over a long period, unsure of how able they will be to keep up with repayments.

Rising inflation and the rise in VAT are also putting a squeeze on household budgets, not leaving much room for mortgage repayments.

What is particularly interesting is that now is one of the best times to take out a mortgage. With property prices at a low point and interest rates even lower, in the long term, this is a real buyer’s market. Unfortunately, it is also true that mortgage lenders are demanding much higher deposits than before, effectively pricing great swathes of the population out of the property market.

Which leads us to the simple conclusion that although this is a great time to apply for a mortgage, it is only for those that can afford it. And the dive in mortgage lending is due to wider economic conditions rendering a huge number of people unable to afford the deposits, with another subsection feeling like they can’t afford the deposit, even if they can, due to the uncertainty of their income in the near future.

It will be interesting to see how mortgage lending behaves during the rest of 2011, once the budget has kicked in and the financial outlook is much more certain. Then we will see how much is down to uncertainty, and how much is down to squeezed household budgets.

About the Author

Rebecca Hall


Rebecca Hall worked as an independent mortgage adviser for 10 years before turning to financial journalism full time. She has strong links to the CAB advising families on mortgage refinancing.