It found that 28,500 house purchase loans were advanced in January, a fall of 29% by number on December.
This was down 13% by value and 12% by number on January 2010 – a substantial fall given that the beginning of last year saw artificially low lending after the rush to buy before the stamp duty holiday ended in 2009.
It said that the fall in lending was far greater than the expected seasonal decline between December and January, and a mixture of factors could be blamed, including household budgets coming under pressure from government cuts, rising inflation and tax measures, such as the increase in VAT.
In addition, the mortgage market was further depressed by December’s severe weather and uncertainty over interest rate moves.
The CML said that the market will remain flat given these factors, but highlighted that one month’s data did not mean a spring trend.
By comparison to house purchase, remortgage activity was not so drastically affected, the CML revealed. The number of remortgage loans advanced fell 7% by value to £2.7bn and 6% by number to 22,100.
This was 10% down by value and 5% down by number on the same period of last year.
CML figures showed that remortgaging increased its share of total lending from 27% in December to 28% in January. In addition, Bank of England figures showing an increase in remortgage approvals in the last three months should feed through into higher CML remortgage completion figures during the next few months.
House purchase lending was split equally between first-time buyers and home movers. First-time buyers took 10,500 loans, worth £1.2bn, in January, down 28% by number and 29% by value on December.
Meanwhile, home mover loans fell 29% by number, from 25,400 to 18,000, and 28% by value from £4bn to £2.9bn month on month.
Nevertheless, the average first-time buyer LTV increased from 77% in December to 80% in January, while home movers stayed stable at 68%.
Michael Coogan, director general of the CML, said: “Pressures on household budgets have been increasing both in terms of take home pay, and indirect tax measures, such as the VAT increase, and recent inflationary pressures, so we were expecting a fall in transactions early in the year and a flat mortgage market underpins our forecasts for 2011.
“The bad winter weather and uncertainty over interest rate rises will have exacerbated the fall in lending in January, so it would be premature to draw any firm conclusions about activity levels over the next few months.
“The market remains stable at low levels of transactions.”
Brian Murphy, head of lending at Mortgage Advice Bureau, said it was mildly encouraging to see the market following its historic seasonal pattern, albeit at significantly lower volumes than at the height of the boom.
He said: “February has witnessed more borrowers exploring the opportunities that remortgaging offers, with the volume of those remortgaging shifting back to levels last seen in 2008.
“With the economy still in intensive care, a rising inflationary environment causing concerns for the policy setters and the real impact of the coalition spending review still to take effect, both activity in the housing market and levels of mortgage borrowing are likely to remain constrained throughout 2011.”
