(1888PressRelease)
April 08, 2008 - The credit squeeze for UK households and businesses has become considerably worse in the past three months and is expected to deteriorate further, according to the Bank of England’s quarterly survey of credit conditions released last Thursday. For home buyers this is yet more bad news, following a spate of mortgage products being withdrawn by banks in recent weeks, including First Direct and the Cooperative Bank last week.
Lenders who had been offering highly competitive, ‘best-buy’ mortgage deals prior to the credit crunch were swamped by the response from customers; now that lenders are finding it difficult to obtain the financing they need to offer those deals, they are pulling their mortgage products from the market at an accelerating rate. According to financial information group Moneyfacts, some 13,000 mortgage products were available a year ago – the number now is 4,754, with 2,972 withdrawn during March alone.
And the trend will continue in the next quarter, with banks and building societies tightening their lending criteria across the board, including cutting back on unsecured loans to businesses as well as fewer mortgages for house buyers (approvals for new mortgages are down 40% from a year ago). Lenders are fearful about the economic outlook and unwilling to take risks, especially in light of declining house prices – these have fallen for the fifth consecutive month.
The survey showed that default rates had risen in the last three months and would continue to do so. There were 27,000 repossessions in 2007, a 21% increase on the previous year, but this figure doesn’t include those homeowners who had to negotiate a new arrangement with their mortgage provider because they had trouble meeting their repayments. As the credit squeeze tightens, lenders will be less likely to make such arrangements, putting many homeowners at risk for losing their homes. At least one million people fall into this category, according to the Financial Services Authority (FSA).
Analysts are expecting a series of rate cuts by the Bank of England, the first one probably this month to 5%. Some fear that failing to do so might risk precipitating the economy into recession.
“The credit crunch has brought confidence in the housing market to an all-time low,” said Lawrence Smith of Decision Homebuyers. “With homebuyers finding it difficult to secure a mortgage, and sellers finding it hard to shift their property, the market is in a downward spiral and set to get worse before conditions improve.”
For press enquiries, please contact Phil Rendall on 020 7099 9026
Email: phil ( @ ) dhbuyers dot co dot uk
Web: www.decisionhomebuyers.co.uk
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Decision Homebuyers carries out daily surveys of the national media to provide up-to-date news and commentary on the UK property market.
