Page last updated at 12:45 GMT, Thursday, 20 November 2008

October mortgage lending picks up

For Sale signs
Lending has risen slightly but is expected to stay low

Mortgage lending rose slightly in October, according to the Council of Mortgage Lenders (CML).

Total lending rose to 18.7bn, 7% up from the previous month.

However, last month's lending was still 44% lower than in October last year, just before the credit crunch triggered the current mortgage drought.

The CML said lending would remain weak in the next few months, despite the Bank of England's cuts in interest rates in October and November

"Consumer confidence is now being affected by the worsening economic outlook," said the CML's director general Michael Coogan.

"However, any recovery in lending is also being held back by the continuing shortage of mortgage funding."

Hopeful signs?

The gross lending figures are erratic and have shown monthly increases twice this year already.

I hate to say it but it could be some time before things start to improve
Andrew Montlake, Cobalt Capital

Despite this, 2008 is set to go down as the year which saw the biggest slump in home sales and prices on record.

Some expert commentators have suggested that the fall in mortgage lending may now have reached a trough.

This week the Royal Institution of Chartered Surveyors (Rics) pointed out that its own surveys had shown a recent increase in enquiries from potential new buyers, an good indicator of future trends in home sales.

"However with unemployment set to rise sharply over the coming months, this modest improvement in turnover is unlikely to run very much further," said the Rics chief economist Simon Rubinsohn.

Even if mortgage lending and home sales stabilise at current levels, many experts are forecasting that prices will continue to fall, with some suggesting that they could go down by a further 15-20% in 2009 after a likely drop of around 15% this year.

"Few people will take heart from the fact the latest lending figures are marginally up on September, as they are still massively lower than October last year," said Andrew Montlake, of mortgage brokers Cobalt Capital.

"You have a double whammy where consumer confidence is shot to bits by a rapidly weakening economy and the mainstream lenders are only accepting "quality" applicants with big deposits.

"I hate to say it but it could be some time before things start to improve," he added.

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