Why mortgage lending slumped by a quarter and house prices may fall by a fifth – Telegraph Blogs

Why mortgage lending slumped by a quarter and house prices may fall by a fifth – Telegraph Blogs

Mortgage lending fell by more than a quarter in January, signalling as surely as a falling barometer that the housing market is nearing the end of the calm before the storm. Three years after the credit crisis began, the big surprise is that house prices have not fallen by more already.

Now figures from the Council of Mortgage Lenders (CML) show that prospective homebuyers fear the ‘phoney recession’ will soon turn into a real one – with rising unemployment and interest rates. Government talk about reducing public deficits is turning into real job cuts and even the majority who remain employed are seeing their spending power eroded by rising inflation and taxation. Bank of England base rates frozen at historic lows for two years have helped to insulate borrowers from harsh economic reality so far but that cannot last forever.