Change In Lending Practices Since 2007

[Ulidia]

http://www.ft.com/cms/s/0/591a258c-eef3-11...00779fd2ac.html

Can anyone interpret these graphs please. To my untutored mind they appear to be talking about lending going back to low multiple of salary.

The graphs are actually showing that there hasn't been a significant change in the income multiples that have been granted by lenders since early 2007 i.e. the proportion of loans given at above 3.5 times a single salary or above 2.75 times a joint salary has not decreased significantly over the period.

However, the graphs are also showing that there has been a noticeable change in the type of mortgage business i.e. considerably fewer "new" mortgages to finance house purchases, but rather remortgages are now making up a much greater proportion of the mortgage market. In addition, whilst there are fewer BTL mortgages being granted, the fall in BTL mortgages is not as large as I would have anticipated, given anecdotal information etc.

The third graph shows that the amount of mortgage arrears has more than doubled since early 2007, but that to date, there is little evidence that the lenders are working with those who fall into arrears on alternative payment plans etc.

Each of the graphs are of some interest, but they do not tell a great deal when viewed individually i.e. whilst income multiples are important, it is the increasing % deposits required by many lenders, and more prudent valuations of property, that (I believe) is having a greater impact on the mortgage market to date, not to mention the impact of a vastly different (i.e. much more negative) market sentiment.

In addition, whilst it would seem that the change in lending on basis of income multiples has not been significant, I imagine the fall-off is much greater at the very high income multiples (i.e. 5 times salary etc) but this isn't illustrated in the income multiples graph.

Edited January 31, 2009 by Ulidia