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Mortgage lending still tough in UK as latest figures show loans fell in December

This represents a 12% drop from £13.2 billion in November but a 12% rise from December 2010 when it was £10.5 billion.

December was the fifth month in a row of higher year on year lending but lending totalled an estimated £37.3 billion in the fourth quarter of last year, down from £39.2 billion in the previous quarter but 11% higher than the last three months of 2010 when it was £33.6 billion.

For 2011 as a whole, estimated lending totalled £140 billion, slightly above CML’s annual forecast of £138 billion. This is up 3% from £136 billion in 2010.

‘The closing months of 2011 saw stronger mortgage lending activity and housing transactions, despite the fact that short term economic prospects are challenging,’ said CML chief economist Bob Pannell.

‘There is a glimmer of light ahead for households in that real incomes could stabilise and perhaps even start rising by the end of the year. But, continuing eurozone problems mean that mortgage funding prospects are uncertain, so overall UK mortgage market conditions for the year ahead remain difficult to call,’ he added.

Peter Rollings, chief exeutive of estate agent Marsh & Parsons said that the consistent annual improvement in lending in the last few months should go some way towards dispelling the doom and gloom surrounding the current mortgage market.

'Although the Eurozone crisis still lingers in the background, lenders are acclimatising to the difficult economic environment and improving their offering to borrowers nonetheless. For instance, HSBC recently pledged to boost its level of support to the mortgage market this year, a welcome sign of confidence in the direction of housing market,' he explained.

'While we don’t anticipate mortgage lending to return to anywhere near it’s pre-crunch peak level, if other lenders follow suit and lending conditions continue to improve, we may see the wider national housing market moving in the same direction as London as the year progresses,' he added.

But Paul Hunt, managing director Phoebus Software said that the annual increase in gross lending isn’t large enough to indicate the market is returning to the levels seen a few years ago, but it’s very encouraging nonetheless.

'In the second half of 2011, the eurozone crisis and the resulting rise in LIBOR could have caused lenders to retreat into their shells to weather possible defaults in Greece and beyond. But in fact lenders have demonstrated they are prepared to support the property market in the UK as far as is possible. On a seasonally adjusted basis, gross lending rose in seven of the last eight months, which last happened in 2009. 2012 will certainly offer major challenges to lenders hoping to expand their activities in the UK, but their efforts in the latter part of 2011 demonstrate they are well prepared to meet them. he added.