Good news for mortgage market as Libor eases

Permalink: Good news for mortgage market as Libor eases
by Kay Murchie

After the Governments of Europe and the US announced bailout packages for its banks this week, it has emerged that Libor, the rate at which banks lend to one another, has fallen slightly.

Libor fell from 6.249% to 6.21%, marking a significant shift and providing some much-needed good news for the UK mortgage market.

The fall might seem insignificant but does suggest that banks are coming round to the idea of lending to each other again.

The credit crunch has meant mortgage lending has been restricted and in particular, first-time buyers have been finding it harder to obtain home loans unless they have at least a 25% deposit.

As a result, new mortgage lending has plummeted recently and the latest figures from the Bank of England show that 32,000 new mortgages were approved in August - 70% less compared with the same period last year.

However, according to experts, confidence should return to the mortgage market and loans should be easier to obtain following the Government’s rescue plan announced earlier this week.

In related news, a recent survey of 486 brokers by the Intermediary Mortgage Lenders Association (IMLA) has established that confidence is to return to the market after brokers’ forecasts of future business volumes are slightly more positive than in May or July this year.

Peter Williams, IMLA’s executive director, said confidence among brokers is starting to return, albeit very slowly.