UK mortgages chief sees 2009 lending down on 2007

UK mortgage lending in 2009 will remain below 2007 levels, despite government pressure on banks to match last year's lending volumes, the head of Britain's mortgage industry association said on Tuesday.

Michael Coogan, Director General of the Council of Mortgage Lenders, told the CML's annual conference that a scarcity of bank funding and tighter consumer credit conditions would continue to weigh on loan growth next year.

Coogan said net lending may in fact contract in 2009 as repayments on existing mortgages exceed new loans, in line with a prediction last week from former HBOS chief executive James Crosby in his government-commissioned report on the UK mortgage market.

"Can this downward trend in the last 12 months be reversed so that we reach 2007 levels of lending next year as the government has insisted? The simple answer is no," Coogan said.

"In fact, unless government takes further targeted action to help market participants, we will see a worsening of the picture next year compared to this. I would not therefore disagree today with Sir James Crosby's analysis or prognosis in his report."

The CML forecasts 2008 net mortgage lending of 40 billion pounds ($59.30 billion), down from 108 billion pounds in 2007.

The government said in October that lenders must maintain lending availability at 2007 levels as a condition of their participation in its 37 billion pound bailout of the banking sector. Three banks — Royal Bank of Scotland, Lloyds TSB and HBOS — have signed up to the rescue package.

Last month, the government also put pressure on mortgage lenders to pass on in full the Bank of England's surprise 1.5 percentage point base rate cut to their mortgage customers.