Mortgage lending to drop by a fifth, report finds

Rising mortgage arrears and falling house prices are among the factors that will contribute to a drop in lending this year, analysts have stated.

According to Datamonitor, the UK mortgage market is likely to shrink by close to 20 per cent in 2008, as the credit crunch will further take hold.

This is despite figures from the Council of Mortgage Lenders that showed lending had increased by five per cent last month compared to June.

Karina Purang, Datamonitor's financial services senior analyst, said: "Lending markets are currently beset by high market uncertainties with the ongoing credit crunch, falling house prices, rising arrears and repossessions and indebted consumers struggling to find credit."

The report predicted that lending would total £293.55 billion this year, down from £363.8 billion in 2007.

Earlier this week Abbey Mortgages advised homeowners that taking on a lodger could help them avoid mortgage arrears.

How can I remortgage with bad credit