Mortgage Lending 7% Rise
By Diane Ray. Published on November 20, 2008 This post currently has one comment.
Figures released today by the Council of Mortgage Lenders (CML) show that mortgage lending rose by almost 7% in October. Gross mortgage lending (this does not take into account repayments and redemptions) totalled £18.7 billion in October, up from £17.5 billion in September. However this has to be taken into context as this is still some 44% lower than the same month last year.
Michael Coogan, director general of the CML, said ‘While lending in October ticked up from a low figure in the preceding month, the outlook is one of continuing weakness for housing and mortgage markets in the coming months, despite the Bank rate cuts in October and November. Consumer confidence is now being afffected by the worsening economic outlook. However, any recovery in lending is also being held back by the continuing shortage of mortgage funding.’
So a headline 7% increase might look good but the overall property market is in a dire position.
This is echoed by the National Association of Estate Agents (NAEA) who have said whilst their members are reporting a slight rise in monthly sales per agent they are also seeing a falling number of house purchasers registered with them.
Chris Brown, President of the NAEA, said ‘Sellers are beginning to face up to the reality that their houses are not worth as much now as they were 12 months ago. He goes on to say ‘Prices are becoming realistic, and we hope that this provides the boost needed to encourage those families who so desperately want to buy house to get onto the market.’
Moneyfacts said today that ‘In the last two months the Bank of England has slashed (the) base rate in an attempt to kick start the economy, but borrowers are still not feeling any real benefits as margins continue to increase and ever bigger deposits are needed to get the best deals.’ Basically whilst the Base rate has fallen a total of 2%, average 2 year mortgage tracker rates have only fallen just over 1%.
There are signs that new deals are coming onto the market from the big lenders. Abbey has announced it will be reducing three year fixed rate mortgages by up to 0.5%. This will be with effect from Friday, 21 November.
How far can and are lenders willing to go with reducing their lending rates when they have to balance this against the rates they offer to savers? According to Moneyfact, since the recent Base rate cuts only 28% of lenders have cut their standard variable rate whereas normally by this stage around half would have done so.
What more can and should the government do to support the provision of mortgage finance? Perhaps we will hear some news from Alistair Darling in the Pre-Budget Report on Monday?
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I run a cash home buyer company and the majority of home owners that contact us because they need to sell quick are stuck on expensive fixed rate mortgages of 6% and above. We have also found that most lenders we speak to are unwilling to provide help to struggling homeowners and often start proceedings after just 1 missed payment. On the ground we believe that prices are back to 2004 levels and any desperate seller who has bought since that date should aim merely to clear their mortgage and not expect to make any profit now or in the next 2 years.