Lenders blame ministers for plunge in house sales

MORTGAGE lenders today attacked the Government's "conflicting and incoherent" economic policy, blaming it for paralysing the housing market.

Lenders said they were in an impossible position - under pressure to cut borrowing costs while at the same time keeping saving rates high as well as paying interest on government bail-out loans.

Michael Coogan, director general of the Council of Mortgage Lenders, said: "Current policy objectives are conflicting and incoherent. The Government needs to decide on its key priority.

"The tug-of-war with lenders being pulled in every direction at once needs to end."

CML reported that 39,900 mortgages were agreed in October - the second lowest since the body started collecting data in January 2002. The figure was 52.1 per cent down on October last year and 61.1 per cent down on August last year when the housing market peaked.

It was slightly up on September but CML said this may be because of the delays in completing sales amid uncertainty over whether the Government would introduce a stamp duty holiday.

A Royal Institution of Chartered Surveyors survey revealed house sales kept falling last month, and the average number of transactions hit a record low. Estate agents sold 10.6 properties each on average last month - the lowest figure in the survey's 30-year history - and down from 10.9 in October. They say properties are not moving because lenders are refusing to give mortgages.

Mr Coogan called on ministers to "urgently review" how their approach was affecting banks' ability to lend money. "Ultimately the response of each lender - whether on commitments to follow base rate moves or to finance new business in the future - will depend on its access to, and price of, its funding," he said.

The Department for Communities and Local Government released yet more gloomy data today showing house prices fell 7.4 per cent year-on-year in October, a further drop on the year-on-year slump in September of 5.1 per cent.

Howard Archer, chief UK and European economist at IHS Global Insight, predicted house prices would keep falling until early 2010 to 35 per cent below their August 2007 peak.

"Very tight credit conditions, stretched housing affordability, rising unemployment, muted income growth and widespread expectations that house prices will fall a lot further - these are likely to outweigh the benefit of the Bank of England slashing rates," he added.