Mortgage action to be taken as loans continue to fall

13 August 2008 / by Rebecca Sargent
The number of approved home loans has continued to fall as lenders fail to loosen up, new research from the Council of Mortgage Lenders (CML) has revealed, prompting the Government to act, as inflation hits new highs and housing market activity reaches new lows.

According to the CML, mortgages have become unattainable, as the average homebuyer was forced to put a 22 per cent deposit down in June. It argued that "lending continues to be on conservative terms, as lending criteria have tightened in response to the shortage of funding and current market conditions."

Head of research at the CML, Bob Pannell, commented: "Mortgage lending activity remains relatively weak and will decline further in the coming months as a result of funding constraints and lower consumer demand.

"The majority of lending continues to be to people with larger deposits, which is prudent for borrowers and lenders in a slowing housing market."

As a result of the poor conditions, rumours are rife that the Chancellor Alistair Darling and ministers are planning measures to revive the stagnant mortgage market. According to reports in The Times today, Mr Darling is expected to order an extension of the Bank of England's emergency £50billion Special Liquidity Scheme, making it easier for banks to lend.

The Special Liquidity Scheme has so far proven a success and, according to experts, an extension could prove more fruitful than another plan the Chancellor has leaked.

Just last week, speculation was rising over the Chancellor's rumoured intentions to offer stamp duty relief to first time buyers. However, sources say this has done more damage than good – as Darling failed to deny or confirm the rumours, buyers are reluctant to commit until they know.

Commenting, Peter Bolton King, chief executive of the National Association of Estate Agents (NAEA), said: "I remain concerned that the optimism for the next few months may be scarred by the current uncertainty regarding stamp duty. The confused messages being sent out by the Government will undoubtedly have an impact on consumer confidence as the public is understandably confused at present about whether to buy or sell.

"Members of the NAEA have already seen buyers adopt a 'wait and see' attitude as a result. This of course will have repercussions on the property market as a whole and I fear next month's figures may reflect this halt in proceedings rather than a levelling out in the market place that may have naturally ensued."

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