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Home Owners => Mortgages and Insurance => Topic started by: The Prophet on November 21, 2013, 09:55:36 am

Title: Mortgage lending up by more than a third in 12 months.
Post by: The Prophet 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 (