Tuesday, Jan 13, 2009
Mortgage products and lending continue to evaporate
mortgagestrategy: Available products drop to new low
The number of mortgage products available in December fell a massive 79% from the same time in 2007, data from Mortgage Brain has revealed. At the end of December 2007, 24,094 products were available to brokers in the UK. This dropped to 5,095 at the end of December last year, amounting to a fall of 79% in the past year. The number of variable rate products went from 6,628 at the end of 2007 to just 381 by the end of last year.
Posted by jack c @ 06:14 PM (380 views) Add Comment
8 Comments
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1. paul said...
Yes, because the current transaction famine is all about mortgage supply, and nothing to do with affordability relative to incomes.
The VIs keep spinning them, we keep swatting them since 2003.
2. crunchy said...
In an emergency call HPC's swat team, operating 24 hours a day
No dial up charge V.I or BS.
Small enough to care big enough to cope. ( est 2003 )
Your lifestyle could be at risk if you do not keep up with your S.W.A.T.S.
3. troy said...
What actually constrains bank lending is the capital adequacy requirement, something that is imposed not by our own central bank but by the Bank for International Settlements (BIS). Called “the central bankers’ central bank,” the BIS pulls the strings of the private international banking system from Basel, Switzerland. http://www.webofdebt.com/articles/creditcrunch.php
4. crunchy said...
3. troy Thanks for the link!
5. str 2007 said...
Playing devils advocate just for a second.
Is their a limit to the amount of sales a mortgage product can have ? I doubt it.
My point is does the number of products on the market actually matter ?
Doesn't it simply mean that there would be more of each product sold (assuming lending criteria etc. was met and there was indeed demand).
I think what is far more relevant than the amount of products withdrawn is the TYPE of product being withdrawn.
Would be interesting to see a graph or something showing the amount of 100%, 95% products that were available and what is now the max LTV available and how many of those products are available.
But also to bring my previous point up, if their is only one 90% LTV product available surely everyone who needs a 90% LTV mortgage goes and buys that mortgage.
6. str 2007 said...
And this taken from the articleto justify my point :-
''But he adds that although these figures are low they are still up on where they were six years ago. In 2002 the number of available products stood at less than 4,000, compared to the current 5,095.''
And there was no shortage of applicants in 2002.
So IMO this reduction in available products is a red herring.
7. braindeed said...
@Paul Yes, because the current transaction famine is all about mortgage supply, and nothing to do with affordability relative to incomes.
Well, affordability has actually improved - still ludicrous, but an improvement nevertheless. What has changed is the bank's sensitivity of the perceived value of the assets they are lending against, and the acceptance that the bubble has burst - with the notion that they have to cover their arses with any deposit, in a falling market.
Of course, masses losing their jobs only adds negative sentiments to the whole equation. I reckon about another 20-25% fall, and transactions will start climbing - but gently.
Where do the VI's get their figures - they're going to twiddling their thumbs, until they’re more honest (you've got to larf) and the discerning buyer (for they will be exactly so!!!) can see that.
Ho hum – bottom sweepstake anyone?
8. fjcruiser said...
The scarcity of mortgage products in itself is not a real problem: 24,000 was just insane in 2007. 5,000 is still a large number.Out of these 24,000, there were probably quite a few which were loss leaders or the margins were so thin, it did not make economic sense. People are surprised that banks are now making 200 basis points margin on their mortgage. In fact below this margin, it is not really profitable to lend money. Let's say the banks have gone back to more prudent lending by raising their margins. If people want to borrow, they will have to pay for it. Hence they will borrow less, so house prices will have to come down to meet demand. There will also be the case that buying may not be right for everyone. In a way, on the continent, it hasalways been more expensive to buy than rent. The primary reason why people bought was to be able to pass on their wealth to their children in the belief any other asset class depreciate over time except property.
In the UK it has been an aberration since 2000 that paying a mortgage was less expensive than renting. Why ? cos the banks lengthened the mortgage to sometime 30 years while the average on the continent is around 15-20 years.