Mortgage lending to hit 30-year low

Mortgage lending is expected to to plunge to just £6 billion next year - the lowest figure since 1980.

The total will also mark the most subdued growth since 1968, according to the Council of Mortgage Lenders.

First-time buyers are likely to be particularly effected as they struggle to get a foot on the property ladder, the group said.

Before the credit crunch, net lending was around £110 billion in 2006, while this year it is estimated at some £9 billion.

The fall in lending levels is being driven by the ongoing shortage and cost of funds, as well as muted consumer demand.

The situation is being exacerbated by the fact banks will have to repay the remaining £130 billion they borrowed through the Government's Special Liquidity Scheme by the end of next year.

The CML added that the Financial Services Authority's ongoing mortgage market review continued to be a "major and unhelpful source of uncertainty" for the industry, as lenders did not know when it would issue firm rules, or whether it would modify its current "excessively risk-averse approach".

The CML said: "Over the short to medium term, lenders will need to manage some large-scale re-financing of wholesale funding."

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