Net mortgage lending in the UK will likely decline by a third in 2011, as the residential market shows continued weakness, according to London-based lobby group Council of Mortgage Lenders (CML).
According to CML, net mortgage lending will plunge S$12.3 billion (£6 billion) next year, compared with £9 billion this year and £40 billion in 2008. The number of homes sold will also decline by 30,000 to 860,000, it said.
The group said that while home prices in the UK will avoid a dip next year, weakness in the housing market “may persist for some months.”
“The supply of funds to the mortgage market remains much more limited than before the crisis, and households are much less confident about taking on large-scale borrowing commitments,” said the CML. “Uncertainty about the availability and cost of mortgage funding will remain.”
Latest data indicated a mixed outlook of the UK housing and mortgage markets. LSL Property Services PLC and Acadametrics Ltd said last week that home prices increased to the highest pace in November, while Mortgage lender Halifax said prices dropped 0.1 percent.
Meanwhile, mortgage approvals dropped to an eight-month low in October and home demand may suffer, as the government carry out the biggest budget cut since the Second World War.
The gross amount of mortgage lending would remain at £135 billion in 2011, said the CML.
“Activity in housing and mortgage markets is set to remain broadly flat in 2011 and we do not envisage a return to the lending levels that characterised the middle of the last decade for many years to come,” it said. “Given the continuing economic uncertainties, there is little to encourage buyers.”