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Mortgage lending may halve, warns CML

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Date: Friday 11 Apr 2008

LONDON (ShareCast) - The Bank of England must double its efforts to deal with the credit crisis, warned the Council of Mortgage Lenders (CML) today, with mortgage lending in danger of halving this year.

Lending hit £108bn in 2007, but the CML reckons its forecast for a 15% drop in 2008, announced last October, could be well wide of the mark.

"Potential borrowing still exceeds the industry’s collective capacity to supply funds,” said CML chairman Steven Crawshaw. “It is therefore a real possibility, looking forward from today, that net lending in 2008 could reach only half last year’s level unless additional funds become available."

He said the Bank of England must tackle the fear that banks have of lending to each other in the wake of last summers sub-prime mortgage crisis.

Crawshaw told those at today’s CML annual lunch that lenders will manage down demand “by tightening lending criteria, increasing price, or withdrawing more products from the market altogether.”

Earlier this week, the BoE said it will provide liquidity assistance of £15bn through a three-month open market operation.

The Bank will offer the money at three-month maturity, plus a further £1.35bn in short-term maturities via an auction on 15 April.