Lending for house purchase last year was the lowest for 38 years, the Council of Mortgage Lenders has reported.
It has also criticised the Government for ‘less helpful’ policies towards the housing and mortgage markets, which it says will increase repossessions.
Martijn van der Jeijden, chairman of the CML, says in his introduction to the CML’s annual report for 2011, that cuts in State support for borrowers in difficulty will put ‘upward pressure on mortgage arrears and repossessions in 2012 and beyond’.
He also criticised the Government’s ‘insistence that its welfare reforms should entail paying housing benefit to tenants rather than landlords’, saying that this would discourage lenders.
Van der Jeijden, who describes last year as ‘challenging’ for the UK economy, borrowers and lenders, is also critical of the FSA’s proposed reforms. He says: “It is clear that we still have a great deal to do to help deliver the right kind of regulatory reform which does not unnecessarily constrain the mortgage market.”
The report shows that there were 508,000 house purchase loans last year, down from 538,000 in 2010 – and the lowest annual total since 1974. Lending to first-time buyers slipped by 2% last year, compared with 2010.
Altogether, says the CML, there were 870,000 properties purchased last year, including cash purchases and buy-to-let.
Buy-to-let lending was the only sector that grew, expanding by 40% – with £14.1bn advanced, up from £10.01bn the year before. Even so, it remains subdued, and far down on the £45bn buy-to-let loans in 2007. Altogether, there were 124,000 buy-to-let loans last year, a 32% increase in number on 2010.
Remortgaging also grew, up by 18% to reach £46.7bn.
The CML’s annual report also criticises the European Commission for trying to impose its directive on credit agreements relating to residential property on the UK market.
It calls the Commission fundamentally misguided in its attempts to create a single mortgage market in Europe. Under the directive, buy-to-let mortgages would be treated like ordinary residential mortgages and assessed on the borrower’s income, but not on rents. The CML wants buy-to-let lending to remain outside the scope of regulation for the home-ownership market.