Lenders warned last night that consumers would face continued 'mortgage rationing', with a 'worsening of the picture next year' unless the government stepped in to support the industry.
Michael Coogan, director general of the Council of Mortgage Lenders, said a 'dysfunctional market' had been created as the demand for mortgage loans outstripped supply in the past year.
Mortgage borrowing would not return to 2007 levels next year because consumer confidence had now been damped by fears of unemployment, he said – a sentiment apparently at odds with the government, which has pledged that bailed-out banks will maintain mortgage lending at last year’s levels.
Indeed, Coogan said it would be a 'good outcome' in 2009 if the UK saw gross lending at the 2008 level, estimated to be £258bn. Gross mortgage lending in 2007 was £363bn.
However, Coogan said: 'Bearing in mind we will be in a recession and reflecting on the figures... from the 1990s, this would be a real challenge.'