UK banks will not increase mortgage lending this year as extra regulatory pressures and a lack of funds continue to restrict the availability of finance to borrowers, Hometrack says.
The mortgage market tracker has predicted lenders will approve 1.2m mortgages over the next 12 months, which marks no change on its 2010, figures and a decline on the 1.3m approved in 2009.
Hometrak expects 575,000 home purchases, 355,000 remortgages and 270,000 other borrowings secured on homeowners’ properties this year.
David Catt, chief operating officer, says: "This a far cry from the three million-plus mortgages that were issued at the height of the property boom in 2007.
"The benchmark has been reset and what we're seeing now is a new norm in lending."
In 2011 the lending market will be dominated by the same issues as 2010, he says, including a constrained securitisation market and unpredictable wholesale funding market.
In addition, the Bank of England's Special Liquidity Scheme, totalling £185bn, must be repaid by the beginning of 2012.
“The pressure on banks will be immense," he says.
Lenders will be reluctant to make any major changes to their lending activities while consultation of the FSA's Mortgage Market Review (MMR) is ongoing, he says.
“Until consumer sentiment, money markets and the global economy have recovered their equilibrium and there’s clarification on regulatory policy, lending levels will remain subdued.”
Hometrack forecasted house prices will fall by 2% in 2011, but it does not expect the base rate to rise in 2011.
Went into administration April 2018
Threat of legal action looms over Woodford IM
View from the front row
Retirement Planner Forum 2019