Mortgage Lending Sinks Again
Mortgage lending sank to a new low in April as borrowers find it hard to finance borrowing in the current economic conditions. Mortgage rates continue to rise as lenders continue to suffer from the credit crunch.
The Bank of England reported last week that mortgage lending had sunk to a new low. In the last 12 months the number of mortgages approved for house purchases has fallen by nearly half. In April 2007 there were 113,000 mortgage approvals, but that had fallen to just 58,000 in April this year. The latter figure represents the lowest number of mortgage approvals in any one month since records were first compiled by the Bank in 1993.
The impact of the credit crisis is continuing to have an adverse effect on house buying as homebuyers are struggling to find affordable mortgages, with banks and building societies showing no signs of becoming more relaxed in their attitude to lending in the current cycle.
Two weeks ago Nationwide building society was praised for cutting its mortgage rates, but last week it increased its rate for new customers, following a number of other lenders doing the same. One example is a two-year fixed rate, with a 10% deposit. The rate has gone up from 6.15% to 6.45%.
The last few weeks has seen another increase in the swap rate as lenders anticipated no reduction in the Bank of England base rate, and this will only serve to increase mortgage rates.
Some economists view the cut in the number of borrowers as a sign of weakness in the wider economy, and not just the property market. There are implications for consumer spending and support industries.
For example, estate agents are feeling the pinch. Around 1,000 branches have shut down since the start of the year.
For borrowers looking for a good deal, there may be an answer by looking beyond the High Street. There are better deals to be had away from the well-known names. Finding a broker and shopping around is a sensible strategy.
