Mortgage lenders warn of squeeze on borrowers

A lending crackdown by worried banks will squeeze would-be borrowers this year despite glimmers of revival in December, the Council of Mortgage Lenders warned yesterday.

The CML expects £133bn in gross lending from banks and building societies this year, 5 per cent down on the £140bn lent in 2011. Its chief economist Bob Pannell, pictured, warned that the first half of 2012 would be particularly tricky as a fast-fading economy and the eurozone crisis takes its toll on lenders. "The near-term prospects are relatively lacklustre, although the second half should be stronger," he said.

The warning took the gloss off more positive CML figures, which showed a fifth successive month of year-on-year growth in mortgage loans in December. A total of £13.2bn was handed to homeowners, up 12 per cent on a year earlier, but the recent strength comes in comparison with a particularly soft period for the housing market.

The CML is pinning hopes on inflation easing this year, as well as a pick-up in first-time buyers before the stamp duty exemption for homes worth up to £250,000 expires in March. But most experts are forecasting at best stagnation for the housing market this year.

Richard Sexton, at the chartered surveyors e.surv, said: "The £140bn lent in 2011 is scarcely more than a third of what it was in 2006. 2012 will be equally as challenging. The economy has ground to a halt, and Germany's Chancellor Angela Merkel is holding the eurozone together with duct tape. Increasing lending substantially, particularly to first-time buyers, isn't on their radar."