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Dave Beans

Business Mortgage Lending Figures First-Time Buyers Shut Out Of The Housing Market As Mortgages Dry Up

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http://www.guardian.co.uk/business/2010/aug/31/mortgages-credit-crunch-banking

Mortgage lending fell sharply in July, fuelling concerns that Britain's banks are turning away first time buyers and preventing a recovery in the property market.

According to Bank of England figures net lending fell sharply from June's £518m to £86m, the fourth-lowest monthly lending figure since records began in 1993.

The central bank said annual growth in lending fell, based on the last three months' figures, to 0.4% from 0.6%.

Critics of the UK banking sector said it would be difficult for the housing market and the wider economy to prosper as long as high street lenders failed to meet their commitments to increase business and mortgage borrowing.

Lord Newby, a liberal democrat Treasury spokesman, said: "Mortgage lending has gone from feast to famine, down by two-thirds in four years. The banks went wild in the boom, but while no one is saying we should go back to 125% mortgages, this mortgage starvation punishes first time buyers with good jobs."

Lenders have consistently missed lending targets over the last year, blaming reluctant consumers for the subdued level of borrowing. The banks said homeowners were using low interest rates to repay loans rather than extending them as they did in the earlier part of the decade.

Banks also pointed to figures showing the number of mortgages approved for house purchases edged ahead slightly during the month, rising to 48,722 from 48,562, though these were well down on the levels of more than 100,000 a month seen during the housing boom.

Net lending by mutuals remained in negative territory at -£379m in July against -£432m in June, according to the Building Societies Association (BSA).

Adrian Coles, director-general of the BSA, said: "There remain significant challenges such as heightened uncertainty about job prospects and household incomes, potentially limiting future demand. This could make it difficult to sustain the growth in activity."

Financial markets brushed off the lending figures as the FTSE100 in London rose on the back of slightly better than expected consumer confidence figures from the US.

The FTSE 100 finished the day up 23 points at 5225, while the Dow Jones index rallied after earlier falls to register an increase of 41 points.

However, another American survey showed manufacturing activity in the Midwest slowed in August. The drop in the Chicago Purchasing Managers Index was similar to declines seen in other regional manufacturing reports throughout the month.

Businesses said they were less likely to take on new staff over the next six months, prompting fresh calls for the Federal Reserve to inject more cash into the economy to boost jobs.

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"Critics of the UK banking sector said it would be difficult for the housing market and the wider economy to prosper as long as high street lenders failed to meet their commitments to increase business and mortgage borrowing."

This single sentence from the article pretty much sums up why the penny still hasn’t dropped for most people as to the predicament we’re in.

The fact is that net lending to households in July was still positive – the outstanding debt is still rising.

In 2007 when the credit crunch started, household debt stood at 99.6% of GDP. On the most recent figures, debt now stands at 102.4% of GDP. That’s down a little from the peak of 104.9% in Q4 2009 (because notional GDP is currently rising faster than debt), but we’ve got a long way to go to return to the sort of debt ratios that we saw throughout the 90’s.

HouseholdDebtToGDP_Q210.gif

The deleveraging of UK households has barely begun, and yet as far as most commentators in the MSM are concerned (and most politicians + many economists too), we can’t 'recover' from the bust until banks start adding more to the already enormous debt pile, and the housing market resumes its journey into the stratosphere.

We’re three years into this correction now and yet there remains a disheartening lack of understanding of the scale of the problems that we still face.

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"Critics of the UK banking sector said it would be difficult for the housing market and the wider economy to prosper as long as high street lenders failed to meet their commitments to increase business and mortgage borrowing."

This single sentence from the article pretty much sums up why the penny still hasn’t dropped for most people as to the predicament we’re in.

The fact is that net lending to households in July was still positive – the outstanding debt is still rising.

In 2007 when the credit crunch started, household debt stood at 99.6% of GDP. On the most recent figures, debt now stands at 102.4% of GDP. That’s down a little from the peak of 104.9% in Q4 2009 (because notional GDP is currently rising faster than debt), but we’ve got a long way to go to return to the sort of debt ratios that we saw throughout the 90’s.

The deleveraging of UK households has barely begun, and yet as far as most commentators in the MSM are concerned (and most politicians + many economists too), we can’t 'recover' from the bust until banks start adding more to the already enormous debt pile, and the housing market resumes its journey into the stratosphere.

We’re three years into this correction now and yet there remains a disheartening lack of understanding of the scale of the problems that we still face.

Agree 100% with your post FT, sadly to get out of this mess unfortunately it will be more debt, it is estimated that by the end of 2015 personal debt will hit £1.823 trillion.

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  • 238 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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