The latest figures from the Council of Mortgage Lenders show that property loans declined by 2% from April to May. The CML described lending as 'subdued' and said that overall gross lending is down 58% on May last year.
But the slowdown won't prevent a massive repossession problem that is likely to be fuelled by rising unemployment, according to Ian Shepherdson, a UK and US economist.
He told the Chartered Institute of Housing's Annual Conference that repossessions will reach between 100,000 and 120,000 per year by 2011. Repossession levels in 2008 stood at 40,000.
Shepherdson also warned that the collapse of bank lending to the ailing construction industry will have a major impact. Investment by banks has dropped to virtually zero from annual levels of around £6 billion per year.
All of this is contributing to a huge decline in house building with some estimates indicating more than a 50% drop in the number of new homes being built this year compared to 2008.
And the CML warned that the availability of property loans is still being held back in the struggling economy. The low numbers of deals going through suggests the market is still anemic, it suggests, and the outlook is gloomy.
'While recent signs from the housing market have been more encouraging, we do not anticipate a significant recovery in activity in the coming months. Lending volumes appear to have stabilised at extremely low levels, but the weak labour market and lenders' limited access to funding will constrain activity for some time yet,' said CML economist Paul Samter.
