Mortgage lending drops 8%

The Council of Mortgage Lenders (CML) has published data for November showing an 8% drop in mortgage lending.

During the month, gross lending fell to £30.7 billion, down from £33.5 billion in October and £33.2 billion in November of last year.

Figures from the CML are in line with other recent surveys that show a downturn in the property market and it is the first time in over two years that monthly mortgage lending levels have dropped below the level for the same month in the previous year.

The Bank of England’s most recent data puts mortgage approvals at 88,000 in October, the lowest number since February 2005 and the Royal Institution of Chartered Surveyors (Rics) has confirmed that buyer enquiries are continuing to decline.

Michael Coogan, director general of the CML expects the downward trend in gross mortgage lending to continue into 2008 and he believes that lower lending levels will result from a lack of funding, rather than consumer interest.

In terms of house prices, the CML expects inflation to be 1% in 2008, whereas the Rics expects prices to be “broadly unchanged” throughout the year.

The institution does concede that prices could drop in the first-half of the year but believes price falls will not be “extended in duration”, particularly if there are further cuts in the base rate and employment remains strong.

However, repossessions are forecast to rise, from 30,000 in 2007 to 45,000 in 2008 but the Rics makes the point that the figure is well below the levels seen in the 1990s, when repossessions rose to almost 80,000.

http://www.financemarkets.co.uk/2007/12/20/mortgage-lending-drops-8-on-lack-of-funds/ 

A bleak picture of 2008 property market

A study from the Royal Institution of Chartered Surveyors (Rics) paints a gloomy picture for first-time buyers and the overall 2008 housing market.

In its latest affordability index, the Rics suggest that it can now cost 351% more to buy a home than in 1996.

According to the Institution, a couple on lower quartile earnings of £26,595 after tax now have to find up to £27,729 (the equivalent of 104% of joint net salary) to meet the up-front costs of buying a typical home.

The same couple could also face spending 40.3% of their combined net wage on mortgage repayments.

Rics senior economist, David Stubbs, says: “At the start of 2008, first-time buyers are finding it even harder to get a foothold on the housing ladder and the signs are that conditions are unlikely to get better in the short-term. Mortgage lenders are demanding ever higher deposits as the credit crunch continues to take effect.”

For those new to property ownership, the cost of buying a home has been adversely affected by a reduction in loan-to-value ratios, as a result of the credit squeeze, and a rise in stamp duty caused by the high property inflation of recent years.

The Rics is also forecasting that repossession levels will continue to rise this year, predicting that 123 homes will be repossessed each day of 2008.

Mr Stubbs comments: “Those who are struggling with mortgage repayments are still faced with paying a large percentage of take home pay but there may be some release of pressure as earnings continue to rise. If the Bank of England cuts interest rates next week, many will breathe a sigh of relief.”