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Rate Cut Fails To Entice Buyers

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Rate cut fails to entice housebuyers -Larry Elliott

More stabalising at a new level rubbish, transactions are down and prices will follow simple as that.

Demand for mortgages dropped to its lowest level in three and a half years last month as Britain's consumers showed little sign of regaining their appetite for borrowing.

The British Bankers Association said a stalled housing market had prompted a one-third cut in the amount lent for mortgages since last summer but expressed hope that the market was stabilising.

Amid widespread expectations that the Bank of England would cut interest rates in August, the BBA said potential homebuyers may have been sitting on their hands in July.

Spending on credit cards was also weak last month, but the BBA said poor weather and the terrorist attacks on London may also have contributed to the desire among consumers to pay off their credit card bills last month.

Underlying mortgage lending rose by £3.7bn in July, after a £4.7bn rise in June and £5bn in July last year, the BBA said. That was the smallest monthly rise since December 2001. Lending on credit cards rose by just £123m in July - less than half June's £293m increase.

"This could have reflected ... a possible impact of poor weather and the London bombings on consumer sentiment," said the BBA's director of statistics, David Dooks.

Following months in which policymakers had highlighted the risk of a slowdown in household spending, the Bank of England cut rates for the first time in two years in August, to 4.5% from 4.75%.

The Council of Mortgage Lenders said on Thursday that the reduction could help the housing market stabilise.

The CML said total gross mortgage lending slowed slightly to £25.2bn in July, after £25.7bn was lent in June and £28.9bn in July 2004. The number of loans for house purchase fell to 96,000 in July from 101,000 in June, much lower than the July 2004 figure of 130,000.

"Today's figures indicate that the housing market has started to stabilise at a new lower level, last seen in 2003," said CML Director General Michael Coogan.

Ed Stansfield, property economist at Capital Economics, said: "The fact that all measures of lending in July fell back will raise fresh doubts that activity levels in the housing market are through the worst."

I am trying to get my head around the July M4 Sterling Figure reported in the following table indicating Sterling lending to UK consummers hit 17.1 Billion against expected figures of 9.5 Billion. If mortgage lending is at a record low then how come lending is almost twice the expected figure, have we really hit the stops.

Daily FX

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  • 342 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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