Mortgage lending in the UK dropped to its lowest level in October, as activity in the residential market remain subdued, according to latest figures.
About £12.4 billion had been lent during the month, unchanged from the September result but down 9 percent compared with October last year, said the Council of Mortgage Lenders (CML).
“In a normally functioning market you would expect to see uplift in overall activity between September and October following a plateau in the summer months. But this isn’t a normally functioning market,” said Brian Murphy, head of lending at the Mortgage Advice Bureau.
“Borrowers are nervous, even more so since the spending review and confirmation of some half-a-million public sector job losses. This fear for their personal circumstances has contributed towards the drop-off in mortgage applications.”
Peter Charles of CML said that while the subdued market is evidence of the recent recession, key differences can also be seen between today’s economic conditions and the downturn in the early-1990s.
“There is a lower level of mortgage arrears and possessions, reflecting the significantly lower incidence of job losses and, in particular, the marked difference in the path of interest rates,” he said.
“Inflation is expected to remain below the Bank of England’s 2 percent target rate through 2012 and 2013, and with interest rates rising only slowly and little change in the level of unemployment (as the expansion of private sector employment offsets public sector job cuts), the implication is that mortgage arrears will remain well below previous peak levels.”