Commenting on the Bank of England's mortgage approvals data, Simon Rubinsohn, RICS chief economist said; "The continuing lack of activity in the housing market is clearly demonstrated by the latest mortgage approvals data from the Bank of England which remain at historically low levels.
Interest rate cuts and falls in inter-bank lending has not yet encouraged activity to rise in the UK mortgage market. First time buyers and homeowners alike are still struggling to buy a property as banks are still requesting sizable deposits, further stagnating the property market, this will continue unless banks begin to loosen up on lending conditions.
The lack of transactions in the property market is now taking its toll on the high street with spending on a wide range of consumer durable goods plummeting. This has been reflected not just in the collapse in MFI but poor trading news from most other retailers. The Bank of England will need to cut rates further this week for any chance of getting the mortgage market moving."
While rate cuts may help the economy generally, it is doubtful whether it will help the mortgage market as a whole, and by way of example here are the details of a loan application highlighted by Terry Arch whom had been approached by a couple looking for a mortgage.
House purchase price: £300,000
Mortgage required £255,000 (85% LTV)
First Income £140,000 - Second Income £30,000 (Income to loan ratio 1.5)
Credit history is clean
They were turned down by a High St Bank however the application was presented. If anyone else has such an extreme case we would be interested to hear, or is this just an unusual case? I suspect not - emails to [email protected] , and we will publish a list of the most jaw dropping.
Another communication we had was from someone who applied for a mortgage and was told by the lender, who had previously had no problem lending in this area, that it no longer did so as it was a former mining area.
If these loans are being rejected because of scoring on the lenders computers, then who is setting the criteria? One would have thought it came from the banks boards, but they say it is at a local level that the squeeze in lending is occurring and that it's not their fault. But surely criteria are not set on a local level.
In the buy-to-let market the picture is no different, with Nash Harji saying: "I have been an amatuer landlord for about 4 years now. I have an excellent credit rating and a faultless payment record. Yet over the last 6 months when it comes to remortgaging, lenders are putting obstacle after obstacle including ridiculous valuations, in order to not lend you any monies at any interest rate. Anyone wanting to borrow any money seems to have all been put in one big pot labelled - Do Not Touch. No wonder the banks are in trouble - they are certainly not earning any interest from me that's for sure."
