Mortgage lending may fall further in 2009
by Gill Montia
The director general of the Council of Mortgage Lenders (CML) has warned that mortgages will continue to be in short supply into 2009.
Speaking at an industry conference earlier this week, Michael Coogan explained that there are many reasons for this, including an overall shrinkage of the UK mortgage market and the difficulties faced by lenders that rely on the wholesale money markets to fund their businesses.
Mr Coogan criticised the Government for insisting that base rate cuts should be passed on in full to standard variable rate borrowers, describing the demand as both short-sighted and counterproductive.
The rates as which lenders borrow on the money markets do not necessarily come down in line with base rate reductions but according to Mr Coogan, savings rates do decline which can mean that banks and building societies lose some of the retail deposits that are essential to their lending.
The CML is therefore calling on the Government to develop innovative co-ordinated action to ease the mortgage famine.
As things stand, it is possible that 2008 lending levels, which are already at record lows, will be diminished in 2009.
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