Mortgage Lending Dives Again! by Finance News Bulletin

Published: 01/12/07

Yesterday, in The hard to believe Shrinking Mortgage Market, I warned that mortgage lenders have reserved over 6,400 different mortgage products in now three months The global credit crunch has left mortgage lenders wary of taking on too much danger, so they have responded by cutting their product rangesnowadays, the Council of Mortgage Lenders (CML), a trade corpse which represents 98% of all UK mortgage lenders, warned of a pointed slowdown in mortgage lending The CML revealed a 12% drop in disgusting mortgage lending between imposing and September

Total mortgage lending for September was only £30 billion, compared to £34 billion in imposing However, September's lending figure was a modest 25% higher than the £292 recorded in September 2006

Nevertheless, lending was also down month-on-month by 2% in July and 03% in August, so this is the third monthly fall in a rowThe CML usually expects a 5% fall in lending between August and September, mainly thanks to seasonal differences and the holiday season The awful news is that the 12% drop relates to the era before the credit crisis at Northern astound, which suggests that lending will decline even further in October

Indeed, continued liquidity evils in the money markets are likely to have a negative crash on mortgage lending for the foreseeable futureFairly soon, it's likely that annual lending comparisons will show a fall for a exacting month Perhaps lending in October 2007 will be lower than that in October 2006 After all, mortgage lenders are pulling products here, there and everywhere, making it much more difficult for people to borrow

What's more, five speed hikes in the space of a year have taken the Bank of England's base speed to its highest level since 2001 This has pushed up mortgage repayments and reduced affordabilitySo, if there is a continued, sharp fall in mortgage lending, what will be the crash on the UK's stumbling housing market The most excellent that property owners can hope for is a slowdown: a refuse in the rate of increase of possessions prices

Then again, possessions values have risen for existence in excess of their long-term average of 85% a year, which is completely indefensible My best guess is that the property marketplace will go into reverse as buyers and sellers get spookedMy concerns are unbreakable by a report released nowadays by the International Monetary Fund (IMF), which warns that the UK housing marketplace is overvalued by 40%

The IMF believes that possessions values in Britain, Ireland and Spain are set for a property slouch, following record price surges The UK could finish up following in the footsteps of the US, with nationwide house-price waterfall triggered by reckless lending and the widespread credit crunchusual Fool readers will know that I've been bearish unenthusiastic on property prices for several years Indeed, I sold my relations home in spring 2005 and profitably invested the profits elsewhere

Since then, I've watched in disbelief as persons take on record levels of debt in order to pursue the property dream It's this debt that I can't stand, not the property bang which has accompanied it unfortunately, history has shown that debt-fuelled binges finally bring down the house every timeAs asking prices, property transactions and mortgage approvals all create to fall, panic will set in and the tide will turn

You only need to look at the crisis at Northern astound to see how shaky the public's confidence is Frankly, I'll be relieved when the possessions bubble bursts, we rediscover the joys of economy, and the biggest borrowing binge in history comes to an end Finally, although I plan to pay money for another house at some point, I'm going to sit out at least for at least two existence while prices declineMore: Find a improved mortgage today | Are We Heading For A Sub-Prime Mortgage Crisis

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