New mortgage lending down 52% in 2008

The British Bankers’ Association (BBA) has reported that lending for house purchases fell by 52% during 2008.

However, in December the Association’s members approved 22,000 home loans, up from 17,000 a month earlier, although still down 47% on December 2007.

The BBA is cautious about the monthly rise, suggesting that it does not indicate a real recovery in lending and more likely reflects delayed activity from November.

Director of statistics, David Dooks, comments that the decline in the number of loans for house purchases reflects “falling demand from households facing greater economic uncertainty and double-digit falls in house prices over the year which led to a wait-and-see mentality”.

With unemployment rising and property prices continuing to tumble, a prediction made last year by Sir James Crosby may prove to be correct.

The author of the Government commissioned Crosby Report on the UK mortgage market warned that new mortgage lending may fall below zero in 2009, although it should be noted that this would involve repayments and redemptions exceeding the value of new mortgages and therefore does not mean that house sales would grind to a complete halt.

Finally, the BBA figures show that gross mortgage lending by the main high street banks totalled £170 billion in 2008, or 23% less than 2007’s total of £221 billion.

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