Little comfort as October lending remains subdued

"Activity in the mortgage and consumer credit markets continued to be subdued in October, reflecting uncertain prospects for households and lower consumer confidence.

"Credit availability for viable businesses has improved, so a continued contraction in net lending growth reflects repayment behaviour, particularly by larger companies."

David Newnes Estate Agency Managing Director of LSL Property Services said:

“Those of us who have been concerned about the availability of mortgage finance will get little comfort from today’s BBA figures. The BBA has revealed a steady fall in mortgage lending growth throughout 2010. This reflects continued nervousness among lenders about liquidity, which, despite a 0.3% increase in house prices in October, is continuing to hold prices back. Cash purchasers alone can’t prop up the market and it is important to note that the indexes that don’t include cash purchases registered falls in price for October.

“Demand for mortgages is likely to remain sluggish, as household incomes fail to keep pace with inflation, which currently stands well above target at 3.2%.  This will keep a lid on aspirations among would-be buyers and when interest rates rise, probably in the first quarter of 2011, the pain for households will increase.  We can expect mortgage lending to remain slow well into 2011 and allied to spending cuts which are likely to have a disproportionate impact on northern areas, regional price disparity will characterise the market next year.”

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