Page last updated at 09:54 GMT, Thursday, 18 October 2007 10:54 UK

Sharp fall in UK mortgage lending

For Sale signs
A clear slowdown is under way in the property market

There was a sharp slowdown in mortgage lending in the UK last month, says the Council of Mortgage Lenders (CML).

Gross lending dipped by 12% from August to September, to 30bn.

Although lending was still higher than in September last year, the drop from month to month was larger than is usually seen at this time of year.

The CML said it was another sign that the housing market was responding to the five increases in interest rates since the summer of 2006.

"We have been expecting a slowdown in monthly lending levels in line with interest rate rises," said the CML's director general Michael Coogan.

"In the coming months, we expect to see monthly lending levels dip below their 2006 levels for the first time this year as rate effects are exacerbated by the recent liquidity problems in the mortgage market," he added.

Slowdown

The CML said that mortgage lending usually dips by just 5% between August and September.

However, September was the third month in a row that mortgage lending has dropped.

The CML's figures are very much in line with those from other market commentators such as individual lenders and estate agents.

Their regular surveys have all shown a slowdown in prices, sales or new mortgage approvals over the past few months.

Northern Rock

The CML said its figures pre-dated any effect there might have been from the crisis at the Northern Rock.

However, in separate data released on Thursday, the UK's building societies revealed that they had received a big influx of savings last month, probably due to the run on the Northern Rock.

The Building Societies Association (BSA) said its members had seen a record paid 2.82bn into their accounts, nearly three times the amount deposited in September last year and a billion pounds more than the previously monthly record.

"It is likely that a significant proportion of the inflow is due to withdrawals from Northern Rock bank being re-deposited in building societies," said Adrian Coles of the BSA.



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