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Banks Say 3Rd Q Mortgage Lending Will Be Cut

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Banks plan less Q3 mortgage lending
9:40, Thursday 1 July 2010
LONDON (
Reuters
) - Banks plan to cut mortgage lending over the next three months due partly to higher expected funding costs, but raise their volumes of corporate and unsecured consumer lending, a Bank of England survey showed on Thursday.

Higher costs is one reason. What about the prospect of massive default as the economy slips back into an even deeper recession? Banks would not want to lend into that scenario.

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Banks plan less Q3 mortgage lending
9:40, Thursday 1 July 2010
LONDON (
Reuters
) - Banks plan to cut mortgage lending over the next three months due partly to higher expected funding costs, but raise their volumes of corporate and
unsecured consumer lending
, a Bank of England survey showed on Thursday.

Higher costs is one reason. What about the prospect of massive default as the economy slips back into an even deeper recession? Banks would not want to lend into that scenario.

But why raise unsecured consumer lending?

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So this surely will mean even tighter restrictions? If your going to cut your mortgage lending taking out the most risky is sensible. No more 90% LTV?

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Could it be they charge more for it...also smaller amounts, higher volumes...less risk. :unsure:

Yes. Mortgage lending is too risky seeing as most of the profit came from fees and derivatives. Those days are gone.

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But why raise unsecured consumer lending?

Perhaps its got something to do with the fact unsecured lending is at between 10 and 20% and is usually for terms of between one and five years?

Obviously the banks will only be looking to loan to people who can pay it back, plus where possible do things like car loans where they can maybe take back the car (despite the fact the loan is "unsecured").

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Yes. Mortgage lending is too risky seeing as most of the profit came from fees and derivatives. Those days are gone.

Also the loan was based on the security value as opposed to the borrowers creditability and long term ability to pay. (now the long term value of the security has to be looked at as a relevant factor). ;)

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Does that include government owned banks? In the past they have increased mortgage lending to compensate for reductions from the real banks. Gordon would have made sure they obeyed government lending targets (although if they're made to lend and customers don't have to repay, and houses can't be repossessed then the traditional term is gift rather than loan).

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The T'graph's take;

Borrowers warned of mortgage crunch

Homebuyers have been warned that it will become harder to obtain mortgages in the coming months as the global economic retrenchment gathers pace.

Concerns about the levels of Government borrowing combined with the withdrawal of stimulus measures by central banks mean that lenders are finding it more difficult to obtain funding.

That will have a knock on effect for households, as banks and building societies try to conserve cash.

A Bank of England survey showed banks were planning to cut back on the number of home loans they will issue in the next three months, ending a trend of improving mortgage availability since the end of the credit crisis.

Jonathan Loynes, chief European economist at Capital Economics, said: "The Bank of England's latest credit conditions survey strikes a fairly downbeat tone, with banks expecting mortgage availability to decline over the next quarter."

The housing market is already showing signs of slowing down, with Nationwide, Britain's biggest building society, reporting that property prices stagnated this month.

Bank of England interest-rate setter Adam Posen yesterday said that the economy could be at a tipping point.

Mr Posen commented in a speech that he had "laid awake for a number of nights" worrying about the state of the economy.

He said: "The UK economy is potentially switching between two states – a recovery, which we are now in, albeit perhaps an initially weak one ... and the renewal of a severe recession if not outright deflation."

Ahh, sleepless MPC members, lovely jubbly. This thing might just be about to actually, finally kick off mightn't it.

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Still property can only go up in value.

Bank of England interest-rate setter Adam Posen yesterday said that the economy could be at a tipping point.
... :o

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  • 142 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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