'Modest' rise in lending predicted
Updated on 12 November 2009
Mortgage lending looks set to remain subdued during 2010 as lenders continue to struggle to access funding, it has been predicted.
The Council of Mortgage Lenders expects to see only a "modest" increase in new lending during the year, with net lending totalling £15 billion.
While the figure is nearly double the £8 billion it is predicting net lending will reach in 2009, it is well down on 2007's figure of £108 billion.
The group said although there were "signs of life" in the wholesale funding markets, overall funding conditions remained "challenging".
It said the overhang of refinancing commitments that lenders faced from maturing bonds and government support schemes was likely to weigh on their appetite and ability to lend more next year.
It added that low levels of growth in the amount people were saving would also limit the availability of funds for lenders.
CML director general Michael Coogan said: "In terms of new lending next year, we expect a modest increase. But it is difficult to see the case for a dramatic upturn in the absence of significant improvement in the wider economic picture.
"There is a risk that public spending cuts and higher taxes could choke off recovery. So, although we have become more optimistic, we remain cautious about market prospects."
Total mortgage advances are also expected to be subdued, as record low interest rates put people off remortgaging when their existing deal comes to an end.
The CML expects gross lending for this year to reach just £141 billion, rising only slightly to £150 billion next year, less than half 2007's figure of £363 billion. The group said the UK mortgage book was stagnating at present, with repayments broadly matching new lending.
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