Mortgage lending slumps to new low

Another huge drop in mortgage lending - and the much-vaunted rescue package isn't reassuring anyone...

Last Updated: 31 Aug 2010

Mortgage lending plunged to a measly £143m in August, according to the Bank of England. That’s an eye-watering 95% drop on the £3bn total for July, and the lowest monthly figure since the Bank started keeping records in 1993. What’s more, monthly mortgage approvals dropped to 32,000, a further fall from July’s record low – in the same month last year, more than three times as many mortgages got the nod. In other words, the housing market freefall continues – and so far, the Government appears to be doing more harm than good…

We’re getting used to seeing dismal figures emerge on the housing market – given the double whammy of plummeting house prices and tighter lending rules at banks (making it harder for people to get a mortgage even if they want to move), it’s hardly a surprise that many potential buyers are opting to stay put. And August is always a pretty quiet month for estate agents – people are usually too busy topping up their tans and keeping the kids out of mischief to worry about buying a house. But even so, this latest set of results paints a pretty grim picture. In fact, just about the only consolation is that some analysts were expecting them to be even worse than they were…

The Government’s brilliant solution to this problem is a new set of measures to kick-start the market, announced just after this period ended at the beginning of September (in fact, speculation about what this would contain probably helped to depress the August figures even further). This includes a suspension of stamp duty on house purchases up to £175,000 – but it’s a bit hard to see how this is going to turn things around. Even for those people who might be in a position to benefit, it seems unlikely that many will choose to borrow money to buy a house now, when there’s a good chance it will cost 20% less if they hang on for another year. Particularly while everyone’s still worried about recessions and job losses.

Still, if you’re determined to find a silver lining, how about this: as a result of this ongoing decline, the UK’s overall mortgage debt has actually fallen for the first time since records began, from £1,216,728m to £1,216,330m. At this rate, by 5064 AD we’ll be all square. Happy days!

In today's bulletin:

B&B nationalised as meltdown continues
Mortgage lending slumps to new low
MFI gets another lifeline with £25m MBO
Mobiles pay as they go global
More silvertops urgently required

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