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Grim Mortgage Lending Figures from the Bank of England


Bank of England figures on mortgage lending for August showed a near total collapse in the market. Although August is traditionally the quietest month for home sales, August of 2008 was spectacularly quiet compared to one year earlier; £143m worth of new home loans was just 2% of the figure recorded for August of 2007. To emphasise just how much lending has dropped, the figure was just 5% of July’s total. Potential buyers have been put off from taking the plunge by a combination of falling prices and a serious lack of confidence in the market, brought on by so much talk of recession.

The bank’s figures show that the nation’s mortgage debt has fallen slightly for the first time since records began (in 1993), from £1,216,728m to £1,216,330m. They also indicate that the falling market will continue into next year with a record low 32,000 new mortgages approved in August – down 70% from 12 months earlier. Commenting on these figures, Simon Rubinsohn of the Royal Institute of Chartered Surveyors said: “It is significant that net mortgage lending during the month actually stagnated, reflecting the recent precipitous decline in approvals.” 

Some of the big lenders reacted to the most recent turmoil in the financial markets by raising the costs of some of their products. Lloyds TSB (which includes the Cheltenham & Gloucester brand) have put up the cost of its two and three-year fixed deals by 0.26%. Northern Rock and HBOS (which includes Halifax) have gone much further by raising the cost of their entire range of mortgages. In fact, borrowers will now need a deposit of 25% to access the vast majority of HBOS’s home loans.


Estate Agents Feel the Pinch


It is predicted that as many as one third of Britain’s estate agents could shut this year if the housing market continues to decline at its current rate.  The negative prediction has come from Movewithus, the biggest network of independent estate agencies, who say that 4,000 out of the country’s 12,000 property businesses will shut by December.  According to its director, Robin King, sales within its network have dropped by between 30 and 50%.  He summed up the situation by saying: “People may not like estate agents but if they are doing well, everyone else is too.  If no one is buying and selling, it is a sign that no one is making money.”


This prediction came as Gordon Brown was apparently involved in a bitter row with the high street banks about their reluctance to pass on interest rate cuts.  Both Mr Brown and the Chancellor, Alistair Darling, want mortgage lenders to help ease the burdens on families by reducing the cost of borrowing to homeowners.  The British Bankers Association (BBA) defended its members by pointing to the fact that the banks’ were finding it difficult and expensive to borrow money on the wholesale market.  They have indicated that the Bank of England should pump more money into the financial markets to help the situation but the bank has already put £15bn into the current crisis.