Monday, September 29, 2008

Mortgage lending down 95% in one month

Financial crisis: Mortgage lending plunges 95 per cent as housing market 'decimated'

The value of mortgages lent to British homebuyers fell 95 per cent last month, according to the Bank of England. It said mortgage lending dived to just £143 million during August - its lowest since this data was first collected in April 1993 and a fraction of the £2.998 billion lent in July. In other words, unless you are paying cash, you probably won't be able to buy a house now.

Posted by jonb @ 11:42 AM (2271 views)
Please complete the required fields.



24 thoughts on “Mortgage lending down 95% in one month

  • As I said last week, auction for the repossessed properties is more likely to be the only active property market soon.

    Reply
    Please complete the required fields.



  • Until quite recently any month-on-month change had to be adjusted for the number of working days in each month. No such finessing needed here.

    Reply
    Please complete the required fields.



  • Jonb

    ”In other words, unless you are paying cash, you probably won’t be able to buy a house now”.

    And if you’re smart enough to have cash you wouldn’t buy a house now.

    Taking an average 143,000 mortgage that’s just 1000 sales across the country. Assuming that is based on an ave. 75%LTV = ave. sale of 190k x 1.5% commission = £2850 per sale. In my opinion it is just a month or 2 before EVERY estage agent in the country will go bust, followed by rightmove, prime location etc. etc.

    OK that might be slightly dramatic, but I don’t see any agents being around in the New Year with figures like this.

    Reply
    Please complete the required fields.



  • Those with capital reserves and that are well run – ie. that have staff who are involved and will take pay cuts to stick about – will survive and end up the strongest when things pick up again – whenever that is. And there are very, very few that are well run. Plus most of them are BTLers who are about to go bankrupt.

    So all of them? I doubt it. A lot? Sure – 75-85% maybe.

    That’s quite a clearout!

    Reply
    Please complete the required fields.



  • A fairly large percentage of house purchases always have been cash purchases. It will be even higher now, as they are the only ones left.

    If you are selling another house to buy it, the only reason to wait would be to pay less stamp duty, or to have a better chance of actually setting up a chain; but if you have to move to a different part of the country for whatever reason, then you probably won’t wait.

    You could of course try to sell to rent, and wait to buy cheaper later; but it is probably too much hassle for some people.

    Reply
    Please complete the required fields.



  • What Gordon Brown really wants to say :

    That’s it now !!!………… Forget stability………. Forget recovery……… Forget investment value……… Forget pension provision……….Forget Property Tycoon.

    THINK…………………. Roof………………… Over…………………….Head……………………..My………..
    Place………to……….Live………..Shelter………….. You know………………..What would be termed as ‘NORMAL’.

    Reply
    Please complete the required fields.



  • str 2007 said…”if you’re smart enough to have cash you wouldn’t buy a house now” – if you are sitting on cash in a finacial institution at the moment you are probably pre-occupied wondering if it’s safe and where to place it as an alternative !

    Reply
    Please complete the required fields.



  • This makes an awesome graph – I don’t know how to insert pictures here, but if someone goes into the Bank of England’s interactive statistical database, enters the code LPMVTUV and then outputs as an Excel graph – you’ll see what I mean..

    Reply
    Please complete the required fields.



  • jack, i actually think that the government are making a big point of protecting savers. Even to the tune of an extra £14bill this morning for the over £35k club in B&B. I susepct they know they would be absolutely lynched on the spot if they didn’t

    it’s the least this shambles of a government can do , but I am not that worried about my savings, yet…..

    Reply
    Please complete the required fields.



  • Decimated refers to a 1 in 10 or 10% reduction. This is a 19 in 20 reduction.

    Reply
    Please complete the required fields.



  • “The Bank of England has held interest rates steady at 5 percent since April but economists said the figures would mean a cut was likely to be made soon. ”

    And if they do lower rates, the LIBOR will stay high, banks won’t lower rates and Darling will appear on telly again talking about banks’ “duty to lower rates”.

    In other words, lowering rates would be like pushing on a piece of string, and doing so will only serve to undermine their credibility further as having lost control through their own mismanagement of interest rates.

    THIS is the comeuppance savers have been waiting for all these years, after every MPC rate cut to re-stimulate the housing market.

    SERVE THEM RIGHT FOR NOT STICKING TO THEIR REMIT!

    Reply
    Please complete the required fields.



  • true Paul, for the first time in months I am not bothered about the BOE’s meeting, as it frankly doesn’t make a blind bit of difference anymore, unless you have a tracker mortgage.

    Reply
    Please complete the required fields.



  • jack c

    I know, the governments seem to ne protecting savers money as a priority at present though.

    If I had enough money now to buy the house to which I aspired as a final family home without the need for a mortgage, I would be tempted. However, given that same item could well be 25% less in the next 12-24 months (which equates to more money that I could earn never mind save in that period) would I buy now ?

    The answer for me would be no if I had that choice. And definately no for me and my situation as that price fall would currently represent borrowed money.

    Reply
    Please complete the required fields.



  • How much of this reduction is lenders unwilling to lend and how much is borrowers unwilling to borrow? I don’t think that the problem is so much now the availability of mortgages, but more that the tide of sentiment has turned and people are taking the sensible option of waiting until prices become affordable.

    Reply
    Please complete the required fields.



  • Uncle Tom,

    Thanks for the graph, amazing stuff indeed! I’d post the graphic but I’m very busy at work and don’t really want to lose my job in this economic climate!

    Reply
    Please complete the required fields.



  • A small note regarding the B&B. As with Northern Rock any Btler’s who have their morgage with B&B has just become v.highly visible to HMRC. I do hope they’ve all been declaring that rent as earned income!

    Reply
    Please complete the required fields.



  • Thanks night, for posting that graph.

    My take is that this is where house prices move from easing back a percent or two a month and go into freefall, as vendors realise the need to have the cheapest house in the agent’s window, if they are to have any hope of a sale.

    Reply
    Please complete the required fields.



  • dohousescrashinthewoods says:

    That is astounding

    Reply
    Please complete the required fields.



  • That chart looks familiar!

    Reply
    Please complete the required fields.



  • ontheotherhand says:

    Yes amazing. There was a chance for them to let the bubble deflate in late 2004 as the lending reduced, but by mid 2005 they cut interest rates from 4.75 to 4.5 and primed the pump again.

    Reply
    Please complete the required fields.



  • UT
    Let’s hope so, chap from Dragons Den on a post last week guessed at a 25% fall over the next year which would require 2%+ per month.
    In some ways I’m surprised we haven’t seen much larger month on month falls already.

    And wait for the statement from vested interests (as a 2% fall represents less actual money each month (170k-2% = 166.6k = ((£3.4k)), 166.6k – 2% = ((£3.332k)) ) that ”house price falls are slowing on a monetary basis” from the previous month.

    Reply
    Please complete the required fields.



  • Actually it’s far worse than the article suggests!

    To Decimate is a Roman army punishment for cowardice (execution) meted out to 1 in 10 soldiers.

    This crash is already worse than that in percentage terms and it’s only just getting going although by the tone and use of ‘decimated’ it is already deemed apocolyptic.

    Reply
    Please complete the required fields.



  • Letsgetreadytotumble says:

    The graph shows similar amounts of money at each end of the date axis. The fact that houses are now much more expensive as 1993, statistically suggests to me that the drop now is far more significant.

    Reply
    Please complete the required fields.



Add a comment

  • Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
  • Please note that any viewpoints published here as comments are user´s views and not the views of HousePriceCrash.co.uk.
  • Please adhere to the Guidelines

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>