The Black Hole

Santander UK recently announced a 21% drop in gross mortgage lending for the first six months of 2011 compared to the same period of 2010 and similarly today Barclays reported a drop of 10% for the same period. Santander said it reflected the weaker pipeline from the last quarter of 2010, representing reduced consumer demand.

I’m led to believe this scenario is not uncommon and other lenders are facing a similar drop in gross mortgage lending for the first six months of the year - and beyond.

Surely therefore this makes the CML’s revised market forecast for 2011 predicting an increase in gross lending to £140bn from £135bn implausible? This seems to go against other data which suggests general stagnation of the market due to severe rationing of funds by lenders and lack of demand from would be buyers prompted by fears of a downturn in the economy including higher unemployment and weaker consumer confidence.

I appreciate that it is sometimes good to talk the market up. However it is very difficult to see exactly where this extra lending is coming from. Methinks another revision is on the horizon.