3
Mar
Mortgage lending by house buyers may have reached a trough
Mortgage approvals levelling out
The number of mortgage approvals in January for house purchases
held steady at 31,000 the Bank of England has said.
And although approvals are still less than half the level of a year
ago, they have now averaged 31,000 a month for the past six months.
This suggests the slump in mortgage lending seen during the past
year and a half may have now reached its trough.
Total borrowing by individuals rose by just £1.1bn in January,
the smallest increase since records began in 1993. The monthly
increase in all mortgage lending, both for house purchases and for
extra borrowing, was just £700 million. This was one of the
smallest increases on record, and just 10% of the increase seen in
January 2008.
'Substantial deposits'
Building societies in particular have suffered from the slowdown in
mortgage borrowing, with their new lending actually outstripped by
the amount of money borrowers repaid on their mortgages.
Simon Rubinsohn of the Royal Institution of Chartered Surveyors
(Rics), said there was an urgent need for more money to be injected
into the mortgage market. "[The] disconnect between buyer
enquiries and actual mortgages approved highlights the inability of
many buyers to access the property market at the present time
because of the substantial deposits being sought by lenders," he
said.
"Subsequent announcements by both Northern Rock and RBS indicate
that a little more funding will flow into the mortgage market over
the coming months but as things stand, this will only boost the
available finance by in the region of 10% compared with 2008."
Mortgage rationing
The number of mortgage deals available has risen slightly to 1,398,
according to the financial information service Moneyfacts. However
there has been no improvement in their availability to people with
small deposits.Two thirds of those deals are only on offer to those
who can put down at least 25% of their property's purchase
price.And the number of mortgage deals needing just a 15% deposit
has risen slightly from 220 a month ago to 237 now. But loans
requiring just a 10% deposit, once the benchmark deal among
lenders, have become even scarcer then before. There are now just
101 of them, compared with 120 at the start of February and 1,197
at the beginning if February 2008.
"Once again the number of deals available for those with a 10%
deposit has fallen and with the average fixed rate today standing
at 6.31%, they are far from competitive," said Michelle Slade of
Moneyfacts.
"In comparison, someone with a 40% deposit can get an average
rate of 4.84%.
"First time buyers... are meant to be the lifeblood of the
property market, but at the moment there is no incentive for them
to get on the first rung of the property ladder," she added.
'Wary lenders'
Adrian Coles of the Building Societies Association (BSA) said the
housing market was still very depressed.
"Potential buyers may not enter the market while it appears that
house prices are likely to continue to fall," he said. "Lenders may
also be wary about granting loans in a declining market and in the
current unsettled market conditions will have concerns about the
long term availability of funding," he added.
Meanwhile building societies saw the value of their savers
accounts shrink by £390m compared with the situation year ago
when their funds grew by £594m.Mr Coles said this was not
unusual - with more money having been taken out of accounts than
paid in for six Januaries out of the last ten.
"Savers take money out of their accounts to pay for Christmas
expenditure," he said.
ARTICLE FROM BBC.CO.UK/NEWS Tuesday 3rd March 2009.