BoE: Mortgage lending plummets to record low

Permalink: BoE: Mortgage lending plummets to record low
by Kay Murchie

According to the latest figures from the Bank of England, new mortgage lending plummeted in August.

The figures show that banks and building societies lent an extra £143 million during the month. The figure is less than 5% of the £3 billion of net lending the previous month and is the lowest since the Bank started gathering data in April 1993.

According to the Bank, 32,000 new mortgages were approved in August, this figure represents 70% less compared with the same period last year and suggests that the fall in sales and prices will continue into 2009.

Meanwhile, remortgage numbers declined with 64,000 loans worth £8.7 billion approved during August, compared with an average of 88,000 in the previous six months.

While little activity is usual in August in the housing market, prospective buyers have been delaying purchasing a property until house prices stabilise.

It appears that many people are opting to rent after the latest research from property and letting agent, Your Move, shows that demand for rental property rose by 76% in the 12 months to the end of July.

Commenting on the figures from the Bank of England, Howard Archer of Global Insight said stretched buyer affordability and the tightening of lending criteria is having an impact on housing market activity.

Many first-time buyers are finding it increasingly difficult to obtain a mortgage without a hefty deposit and the best rates will be available only to those with an excellent credit rating and a large amount of equity in their properties.

Just last week, HBOS withdrew its entire mortgage range for borrowers and replaced it with more expensive deals.

Aaron Strutt of mortgage brokers Chase de Vere explains that borrowers now require a 25% deposit to access virtually all of HBOS’ fixed-rate and tracker products.