Mortgage lending hits an eight year low

Mortgage lending in the UK hit an eight year low in January amid signs that the recovery in the UK property market may well be veering off course. This comes at a time when hopes have been high that the corner had been turned and the property market was set for a return to growth in 2010. So what is happening?

While there is no doubt there was a surge in demand for property prior to the end of 2009, to take advantage of the reduced stamp duty rate, the large-scale falloff in mortgage lending in January has surprised many. However, when you consider that the UK economy is by no means out of the woods as yet, the Eurozone is struggling and unemployment in the UK is still forecast to increase in the short term, perhaps these are more than enough reasons for the note of caution.

On the upside, many estate agents expect an increase in property prices and property transactions in 2010 although these forecasts were made prior to the Greek problem and may well have changed since then. Whatever happens in the short to medium term there is no doubt that the UK economic upturn hinges upon the UK property market and without an increase in property prices it is difficult to see a sustained recovery in the UK economy.