House prices predicted to fall further amid drop in mortgage lending
Mortgage lending plunged 14 per cent last month as the bank holidays removed the focus on house buying, figures have suggested.
Mortgage lending plunged 14 per cent last month as the bank holidays removed the focus on house buying, figures have suggested.
The Council of Mortgage lenders said gross lending fell to £9.8 billion in April, down from £11.4 billion in March, and 5 per cent lower than a year ago.
The bank holidays last month – including Easter and the Royal Wedding - saw many workers enjoy extended holidays in exchange for taking just a few days annual leave.
Bob Pannell, CML chief economist, said: “It represents an unfortunate temporary loss of signal, at a time when it would be useful to gauge the resilience of house purchase demand to economic uncertainties and the pressure on household incomes.
“Levels of activity look set to remain broadly flat over the near-term. It now seems unlikely that interest rates will rise much, if at all, this year and this should help keep the market on an even keel.”
Analysts warned reduced activity in the housing market would translate into falling house prices. The average value of a home in Britain has already dropped to £160,000, down from £200,000 four years ago before the beginning of the credit crisis.
Howard Archer, an economist at Global Insight, said housing market activity remained low compared with long-term norms, even if it had edged up from its recent lows.
He said: “We suspect that further modest falls in house prices are more probable than not over the coming months as tighter fiscal policy and the possibility of gradually rising interest rates before the end of 2011 maintains pressure on the housing market.”
