Author Topic: Mortgage lending up by more than a third in 12 months.  (Read 3905 times)

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The Prophet

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Mortgage lending up by more than a third in 12 months.
« on: November 21, 2013, 09:55:36 am »
Mortgage lending increases 37% in 12 months.
The fact that CML estimates suggest total gross mortgage lending has increased to £17.6 billion in October, 37% higher than the October total last year is hardly surprising.
Lending is now at its highest level since 2007 and we all know what followed!

Even without Help to Buy (2) Mortgage Indemnity, the Funding for Lending scheme is already cutting mortgage costs and increasing availability for 95% loan to value mortgages.

The increase in mortgage lending is a direct result of three factors all of which will be a "Perfect Storm" for home buyers that have stretched themselves to get on the property ladder, encouraged by the government's Help To Buy scheme and ultra-low interest rates, at the lowest levels for 320 years.

Low Interest rates  -  BoE Mark Carney's 'forward guidance' statement regarding the intention to keep interest rates at the present record low levels until 2016.
Increasing availability of mortgages  -  Especially at higher loan to value ratios, with the state under writing the higher risk.
Higher house prices  -  House prices are rising at their fastest rates since 2008 according to figures from the ONS the average house is now £247,000.  This is just below the 3% stamp duty threshold - at a time when the Stamp Duty revenue received by the treasury has also increased, by 46% in the last 12 months.

House prices are rising; affordability and real incomes are falling. Helping people buy a home they cannot really afford and underwriting these loans, which lenders would otherwise charge higher rates, reflecting the risk, cannot be a good idea.

When interest rates inevitably increase to normal levels between 3% and 5%, research by the Resolution Foundation shows that even with sustained earnings growth, a rise in the base rate to 3.9% by 2017 would leave 1.08million households in 'debt peril' - defined as spending more than half their income on debt repayment. 

Anyone buying a home would be wise to check what their repayments would be should interest rates rise using this mortgage repayment calculator.