This represents a 6% drop from £11.7 billion in November. December was the fourth month in a row where the monthly outturn has been the weakest since 2000 (£10 billion).
The figure is 18% lower than £13.3 billion in December 2009, although comparisons are distorted as some households brought forward house purchase activity in the closing months of 2009 to take advantage of the stamp duty concession expiring at the end of the year.
Lending totalled £34.4 billion in the fourth quarter, down from £37.9 billion in the previous quarter and 11% lower than the last three months of 2009 as a whole (£38.7 billion).
For 2010 as a whole, lending totalled £136.3 billion, slightly above our annual forecast of £135 billion. However, this is down 5% from £143.3 billion in 2009 and the lowest annual total since 2000 (£119.8 billion).
In the CML's monthly market commentary published today, the CML acknowledges that recent inflationary pressures have increased the possibility of a rate rise sooner than previously expected.
However, the CML observes that most of the leading indicators show that the UK growth rate can be expected to slow markedly in the first half of this year, and the CML therefore expects that even if there is a rise, the base rate is unlikely to exceed 1% this year.
CML economist Peter Charles says:
"Money market rates have recently moved higher in anticipation of a rise in base rate and some lenders have recently reflected these increases in their product pricing. Against this backdrop, consumer demand may be weaker than we would otherwise have expected.
"Higher interest rates will also hit the budgets of existing borrowers, although the expected modest rises in base rate will result in a relatively small proportionate rise in monthly payments for most mortgage holders. Consequently we believe there will be little change in the level of arrears this year, and we do not anticipate revising our current arrears forecast."
Paul Sabbato, a director of First 4 Bridging, said:
"The near-paralysis of the mortgage market continues. December is always a quiet month but this was a quieter December than usual.
"There's no doubt that many people who may have been considering buying a couple of months ago have shelved their plans until there is more clarity on when, and by how much, rates will rise. Higher inflation looks like it is going to force the Bank's hand and if that's the case then borrowing will come under further pressure.
"Consumer confidence isn't just being undermined by the potential of rate rises. There's also the small matter of rising unemployment and soaring living costs. If there's a degree of risk in buying a home or taking on a bigger mortgage, more and more people are choosing not to take it. Consumers have never been so cautious.
"Borrowing activity during the first half of the year is likely to remain very muted, mainly due to weak demand in the higher LTV range and the ongoing difficulty many people are having securing mortgage finance."
Nick Hopkinson, Director of PPR Estates, said:
“With gross mortgage lending in December 2010 at its lowest level this century it is clear the UK ‘mortgage famine’ shows no real signs of easing despite the marketing claims of the large banks. Unsurprisingly, lending to small businesses has also declined further in the last quarter too.
"Looking at the stats any claims by the lending banks to be trying to help businesses and individuals obtain essential credit to grow the economy remain empty words. Unfortunately, this has been a consistent theme ever since the Credit Crunch in 2008 which is unlikely to change until the banks have fully repaired their balance sheets.
"This will not happen in 2011 and could take several more years. The complex accounting which is all pervasive these days to hide losses and disguise risk makes accurate predictions around bank stability very difficult and only adds to the overall economic uncertainty."
