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Mortgage Levels Drop In September
The number of mortgages approved for house purchases fell again in September, to just 31,104, making net mortgage lending the lowest for a decade...
The figure, from the British Bankers Association, comes after the Council of Mortgage Lenders had said that the level of gross mortgage lending was also at its lowest for a decade.
The two sets of figures contrast with the much better news that the British economy grew by 0.8% between July and September.
Meanwhile, borrowers are taking out lower house buying loans. Figures from the British Bankers Association showed that the average value of the loans was £142,900, down from £143,500 in August. The average was some £5,100 lower than the average of the previous six months, although 4.1% higher than a year ago.
Net mortgage lending by the major banks, which strips out redemptions and repayments, stood at £1.6bn in September, down on the previous month's total of £2.5bn and the lowest figure since October 2000.
BBA statistics director David Dooks said: "Demand for new mortgages remains low despite more properties on the market and falling house prices."
People's overall reluctance to borrow is also seen in the BBA's figures for unsecured credit. Repayment of credit card debt is narrowly outstripping the amount of new borrowing. The only reason that credit card borrowing in total rose slightly in September was because of the build-up of interest on existing debts.
Demand for personal loans also continued to fall. New borrowing via these loans was 7% lower in September than a year earlier.
Simon Rubinsohn, RICS chief economist, said: "While last week's transaction data from the HMRC recorded a small increase in sales activity in September, the BBA figures paint a more worrying picture, with the number of mortgages approved last month slipping to the lowest level since March 2009.
"This widening gap between the two series highlights the continued importance of cash buyers in supporting the residential market's current challenging circumstances. Significantly, there is no reason to expect finance to become more freely available in the near term and, quite possibly, for some time to come, which points towards the emergence of a new reality in the housing market.
"However, it is not just those working in the residential sector who will suffer in this environment. More generally, people's ability to move for work is also likely to be affected by ongoing problems surrounding the completion of transactions.
"This influence on economic performance will become particularly important over the next 12 to 24 months as public spending cuts begin to bite and jobs are lost."
Andrew Montlake, director of independent mortgage broker Coreco, said: "Figures continue to remain gloomy and the expected pre-Christmas bounce has so far failed to materialise. But this is not simply a case of lack of demand. Whilst the fall-out from the Spending Review may make buyers more cautious, it is ever-tightening lending criteria that continues to stifle the needs of many decent borrowers who wish either to remortgage or move into their first property.
"It is a shame there are many who are unable to take advantage of some of the cheapest mortgage products we have seen, or are likely to see, for a long time."
Jonathan Samuels, CEO of specialist lender Drawbridge Finance, said: "The latest figures from the BBA are a reflection of just how cautious consumers have become.
"Despite falling house prices and some very competitive mortgage products, creating almost ideal buying conditions, borrowers overall are continuing to sit on their hands.
"Demand has been decimated by concerns over the effects of deficit reduction.
"The mortgage market is likely to stay in this limbo until the Spring of 2011 at the earliest, with house purchase approvals consistently low.
"The contrast with professional property investors couldn't be sharper. Activity levels are rising all the time and demand for finance is stronger than ever. The market, as happened in 2008, is splitting in two."
Source: www.estateagenttoday.co.uk
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Article date: 10/29/2010 12:00:00 AM