Mortgage shortage could mean a million miss out

Permalink: Mortgage shortage could mean a million miss out
by Kay Murchie

Steven Crawshaw of the Council of Mortgage Lenders (CML) said a million prospective homebuyers could be without the funds to buy a home due to the lack of mortgages available on the market.

Mr Crawshaw accused the Bank of England for not helping first-time buyers. His warning is certain to worry homeowners who need to re-mortgage when their current one expires.

He added that he had been ’shocked’ by the rapid collapse of the mortgage industry over the last few months.

Approximately 2 million Britons borrowed £107 billion to purchase a house or re-mortgage their current one last year. In October, the CML forecast net lending would fall to approximately £90 billion this year.

However, Mr Crawshaw said just £50 billion would be lent and said potential borrowing still considerably exceeds the industry’s collective capacity to supply funds.

It is therefore a real possibility that net lending in 2008 could reach only half last year’s level unless additional funds become available, said Mr Crawshaw.

Mr Crawshaw’s warning was echoed by other market leaders who expressed their concerns about the potential consequences of the mortgage crisis.

Ray Boulger of brokers John Charcol, said the lack of mortgage finance poses a very real threat to economic activity as well as to property prices.

Mr Boulger added it only needs one person in a chain to find that by the time an offer has been accepted the mortgage market has moved against them, for everyone in the chain to be left high and dry.

There are now just 4,100 different mortgage deals on the market, compared with 15,599 last July.

Mr Crawshaw is urging the Bank of England’s Governor, Mervyn King, to show leadership or face a mortgage meltdown for the foreseeable future.

He also criticised the Government’s proposal this week for a fourth review into the mortgage market. Former HBOS chief executive Sir James Crosby, has been appointed by The Treasury to lead emergency review of the mortgage market. His brief is to stop mortgage offers from drying up through measures to boost lending between institutions and to increase the range of investors in the field.

However Crosby is not due to report back until the autumn and in terms of timescale, recommendations by the time of the Pre-Budget Report would not address the urgency of market difficulties now, nor reverse the shrinkage of the market, concluded Mr Crawshaw.