Mortgage Lending at 19th Low in October

by Mark Johnston

There is more troubled news from the struggling housing market and mortgage industry as a new report published by the British Bankers’ Association (BBA) highlighted a particularly subdued market.The report showed that net mortgage lending has increased dramatically to 3.5% which looked good against the slow September figures of 0.8% but sill highlighted that overall borrowing was the lowest its had been in 19 months.

The 3.5% increase was a welcomed sign in a market where good news is rare but experts pointed out that the figure is a little misleading when looking for signs of  growth. The 3.5% is a net figure which takes into account both mortgage lending and repayments. The amount lent in October was around £7.5 billion which is the lowest figures since way back in 2001.

The British Bankers’ Association’s statistics director, David Dooks said: “In this particular month people have paid less off their mortgages  Whether this is a one-off monthly blip I don’t know, but the figures show that money has been left in personal deposits instead. People are sitting on their cash – a symptom of seeking safety. It is a natural reaction to the uncertainty they face now.”

Chief UK economist for IHS Global Insight, Howard Archer went on to say: “The BBA data showing mortgage approvals edging down further to a 19-month low in October reinforces our belief that house prices will trend down to lose around 10% from their peak 2010 levels by the end of 2011. In our view, the housing market has got little going for it at the moment, apart from low mortgage rates – and that is if you can get a mortgage.

Richard Sexton, business development director at an online surveyors contributed to the discussion by saying:: “The weakness in the mortgage market reflects both nervousness among potential buyers and also more restrictive credit conditions among lenders. But beneath the surface there is a real two-speed market in operation: approvals are actually up for the most expensive properties – wealthy buyers are using large deposits to side-step lending restrictions, and they are more likely to be in parts of the country, like prime London, which have been more insulated from wider market weakness. The flip side is that approvals for cheaper properties have fallen dramatically. It is hard to foresee a significant improvement in mortgage lending, however. Much will obviously depend on mortgage availability, the number of houses coming on to the market, and how well the economy holds up as the fiscal squeeze increasingly kicks in.”

To keep things in perspective, its worth looking at non mortgage lending just to see what the wider market is like and how the economic downturn is effecting peoples spending and borrowing habits.

The overall demand for unsecured loans, like personal loans is following the same weak results as mortgages. Loans have dropped by around 1.7% in 2011 whilst credit card debt have not risen as fast as it was.



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