Last month mortgage lending in Britain fell to alarmingly low numbers. As a matter of fact, only a mere 2% of mortgages were approved compared to this time last year.
To make matters worse, data from the Bank of England revealed fewer home loans were approved last month than over the past decade when records first began. Property prices are falling at their fastest pace in over 25 years. For the past few years many doom mongers were cautioning about the property bubble bursting but even they could not have predicting the main cause would be from global economic meltdown.
In August, the amount of mortgage funding came to about £143 million, compared to last year which was approximately £9.135 billion. Some experts are suggesting that lending figures could actually turn negative very soon. Philip Shaw, chief economist at Investec said, “It’s quite possible that given current market conditions that the stockpile of mortgages actually falls back given the continued strains created by the credit crunch”.
Home prices continue to fall as well since first-time buyers are finding the cost of a mortgage plus lending criteria nearly impossible to attain. Hometrack property consultants revealed a consecutive 12-month fall in house prices going into September. These figures suggest the government’s efforts to raise the threshold on stamp duty to be less effective than anticipated.
As a result, consumer confidence is very low. Figures also show repossessions and unemployment on the rise. Over 32,000 Britons queued up at the dole in August, the biggest monthly rise since the recession of 1992.
Despite inflation targets doubling, we are still waiting for the Bank of England to lower the base rate below 5%. This may not be the sole answer to the country’s woes, but experts feel the time is now for the MPC to drop rates.
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