The Council of Mortgage Lenders (CML) announced today that the number of new mortgage approvals nosedived by 29% in January over December 2010. Total number of mortgage approvals fell to 28,500 from 40,000 reported a month earlier. However, the fall was less steep at 12% compared to January 2010 numbers.
The total value of mortgages advanced was estimated at £4.2 billion for the month of January, a fall of 26 percent from £5.7 billion, recorded in December.
CML blamed rising inflation, cut in government jobs, severe cold conditions and higher tax rates for the lack of movement in the mortgage market.
“With the effects of last year’s government spending cuts beginning to bite, and rising inflation and tax measures putting pressure on household budgets, potential house-buyers are likely to have been discouraged”, said the CML report.
“This, coupled with December’s extreme winter weather, and uncertainty over future interest rate rises, has led to a lack of movement in the mortgage market”, it added.
Remortgage approvals also dipped by 6 percent to 22,100 from 23,000 recorded in December. The total value of remortgages approved, was recorded lower at £2.7 billion from £2.9 billion in December.
“Pressures on household budgets have been increasing both in terms of take home pay, and indirect tax measures such as the VAT increase and recent inflationary pressures, so we were expecting a fall in transactions early in the year, and a flat mortgage market underpins our forecasts for 2011”, said CML director general Michael Coogan.
However, not everybody subscribed to CML’s theory.
“The very weak CML mortgage advances data for January indicates that the housing market started 2011 on the back foot and supports our belief that house prices are headed down further over the coming months”, said Economic Analyst Howard Archer of IHS Global Insight.
“Further bad news for the housing market is the now strong possibility that the Bank of England will start to raise interest rates within the next few months to counter above target and rising inflation”, he said on a cautious note.