Slump in lending levels fuelled by credit crunch
According to a recent report the global credit crunch that has swept across the financial markets in the UK has resulted in a slump in lending levels in the mortgage markets, with a 17% year on year drop indicated in mortgage lending levels. In March the amount lent out in mortgage loans came to around £26.3 billion, and this was a drop of over £5 billion compared to just one year earlier, before the credit crunch took a hold in the UK.
The information comes from the Council of Mortgage Lenders, with one official stating: ‘Lending on completed transactions is currently running at levels considerably lower than a year ago. However, the picture for mortgage approvals for new business and prospective lending levels in the next few months is worsening. We await the eagerly anticipated announcement of further action by the Bank of England to respond to these rapidly worsening market conditions.’
He also said: ‘Early action is needed if we are to be able to maintain a market in which UK borrowers continue to be able to access mortgage funds at reasonable prices. As mortgage costs increase, it remains important for any borrower with potential financial difficulties to speak to their lender as soon as possible, and preferably before they have missed a payment.’
One economist also stated: ‘The low level of mortgage activity is not only a consequence of slowing demand for houses due to the elevated affordability pressures facing potential house buyers, but also increasingly due to very tight credit conditions leading to markedly fewer and more expensive mortgages being available. Furthermore, potential house buyers are now having to provide higher deposit levels, which is a particularly major problem for first-time buyers. The CML data therefore highlight the need for concerted, sustained action to try and get banks to lend to each other, so that more liquidity is available to fund mortgage lending and market interest rates come down.’
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