The latest survey from the Council of Mortgage Lenders (CML) shows gross mortgage lending declined in January to £17.9 billion, 16 per cent down on the £21.3 billion in December and 18 per cent lower than the £21.8 billion lent in January last year.
The vast bulk of the decrease was in lending for house purchase, while remortgaging fell only marginally. Lending for house purchase accounted for £7.1 billion in January, 29 per cent lower than the December 2004 figure of £10 billion and 30 per cent lower than last January’s figure of £10.2 billion.
Reflecting the decline in the volume of lending, the number of loans for house purchase fell from 85,000 in December to 63,000 in January, a fall of 26 per cent.
While this reflects a seasonal trend the size of the fall reflects the cooling in the market.
Income multiples continued to edge up for both first-time buyers and movers, although they remained lower than last autumn.
First-time buyers borrowed an average 87 per cent of the value of their property, against an average of 68 per cent for movers.
Average fixed and capped rates fell slightly in January although average variable rates rose, but their relative popularity was virtually unchanged with 58 per cent of borrowers choosing a variable rate and 42 per cent a fixed rate.
Peter Williams, deputy director general at the CML, said: “These figures show beyond doubt the recent slowdown in the housing market.
“But, as we have said before, the picture this year is likely to be lumpy rather than smooth and it is impossible to gauge the future direction of the market from one month’s figures.
“Confidence measures suggest that consumers began feeling more confident again in January, and this coincides with anecdotal evidence from estate agents suggesting a pick up in sales.”
The Building Societies Association (BSA) also reported a post-Christmas lull in lending with gross advances amounting to £2,682 million in January 2005, down from £3,464 million in January 2004.
Net advances were £744 million in January 2005, down from £1,298 million in January 2004. Approvals decreased to £2,037 million in January 2005, from £2,612 million in January 2004.
Adrian Coles, director-general of the BSA, said: “These figures are no surprise; we are now experiencing the widely predicted market slowdown compared to a year ago.
“However it is notable that over the last three months lending has been broadly stable which is a good indication that fears of a sudden crash are overstated.”
Figures released by the British Bankers Association (BBA) mirrored those from the CML and BSA.
Net mortgage lending in January rose by £4.4 billion much in line with most of the latter months of 2004, though some £0.8 billion weaker than the underlying increase in December of £5.1 billion.
David Dooks, director of statistics at the BBA, said: “Mortgage lending in January returned to the weaker pattern seen in the late months of 2004 after December’s stronger rise and reflected the weakness of approvals in December.
“In the current state of housing market sentiment the relatively slower pattern of mortgage demand looks likely to continue in the early months of 2005.”
