Don’t hope for a Mortgage Any Time Soon, say lenders

Don’t hope for a Mortgage Any Time Soon, say lenders

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Developers spreading rumours that the housing market is showing signs of recovery is more a sign of wishful thinking than the truth, according to the Council of Mortgage Lenders (CML).

Any ‘meaningful revival’ in mortgage lending is unrealistic in the foreseeable future, says the CML – the organisation that represents most of the UK’s major mortgage lenders.

Mortgage lending was down 8% in January compared with December – a massive 52% year-on-year drop.

The CML said the mortgage market is ‘weak’ and home loans are difficult to come by for most people hoping to buy or refinance.

“Mortgage lending activity continues to be very weak and while people are searching eagerly for some signs of recovery, it would be unrealistic to expect a meaningful revival in lending in coming months,” said CML head of research Bob Pannell.

Traditionally, lending drops over Christmas and the New Year, but the CML says mortgage lending is in a rut and a good indicator of house price recovery will be a trend in an increase of gross mortgage lending.

The Bank of England has tried to stimulate lending by cutting interest rates to more or less zero as the government bailed out the banks with billions of taxpayers money, but so far, none of this policy has worked it’s way through to borrowers as banks continue to remain cautious about lending.

One of the main problems is agreeing the real value of a home in a falling market leading to the bank fearing the selling price of the property will leave the lender exposed.

Nevertheless, interested parties like builders and developers are maintaining they are experiencing an improvement in market conditions. Redrow, which has lost about 75% of its value since the housing market peaked in August 2007, said in interim results that a rise in reservations since the New Year is ‘mildly encouraging’.

Other house builders like Bellway and Galliford Try have supported Redrow’s assertions.

Meanwhile, house prices have fallen to March 2005 levels, according to the Land Registry.

The price of an average home has fallen 15.1% over the past 12 months. The 0.8% slip in January left the average property worth £156,753.

Further signs of the worsening property market crisis is the cancellation of the Homebuyer and Property Investor Show, London, due to be staged over the weekend of March 7-9. This was to be the show’s 17th consecutive year.

The show’s web site offers no explanation and simply apologises for any inconvenience.