Tight Mortgage Lending Threatens The United Kingdom Real Estate Market

Tight lending remains an impediment to UK home ownership, and is reflected in rising rental demand and a subdued mortgage market. Buyer pessimism in the face of economic …

Tight lending remains an impediment to UK home ownership, and is reflected in rising rental demand and a subdued mortgage market. Buyer pessimism in the face of economic uncertainties, along with an overall shaky housing market, raises the risk of a double dip in UK real estate. See the following article from Property Wire for more on this.

Property loans in the UK are flat and unless the situation improves the real estate market will not improve and could end up in a double dip, experts are warning.

The latest figures to be released by the Bank of England show that mortgage approvals numbered 48,722 in July, up from an upwardly revised 48,562 in June. But analysts say the approvals are effectively moving sideways and are at such a subdued level they are a cause for concern.

New figures from the Building Societies Association (BSA) show that total mortgage advances by mutuals reached their highest level so far this year at £2 billion during July but this masks the true situation as once redemptions and repayments are taken into account, net lending continued to contract, with homeowners repaying £379 million more than they borrowed in the month.

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‘The data continues to highlight the subdued level of activity in the residential property market, despite the stamp duty holiday for first time buyers of homes worth up to £250,000. The total number of mortgages approved per month has been fairly stable since the beginning of the year, fluctuating within a narrow band of just 2,000. In the first seven months of 2010, almost 340,000 mortgages were approved. This is higher than in the comparable period of 2009 when just over 310,000 mortgages were approved, but is well down on historic norms,’ said Simon Rubinsohn, Royal Institution of Chartered Surveyors chief economist

‘A lack of mortgage finance remains a key problem for many borrowers looking to take their first step on the property ladder, with the high deposits required still proving to be an obstacle for many. Uncertainty over the outlook for the market may also be discouraging would be buyers. This is reflected in developments in the rental market. The latest RICS Residential Lettings Survey released last week showed tenant demand continuing to grow strongly and rents rising due to a lack of supply,’ he added.

Vicky Redwood, of Capital Economics, said: ‘The news on the UK housing market doesn’t get any better. The best that can be said is that approvals didn’t fall further’.

Alan Clarke, economist at LBNP Paribas, said that mortgage approvals moved sideways on the month. ‘This is essentially what has been happening all year. It suggests housing is going nowhere fast,’ he added.

According to Andrew Goodwin, senior economic adviser to the Ernst & Young ITEM Club, said the figures ‘provide further confirmation that the housing market is heading for a double dip’.

Adrian Coles, director general of the BSA, admitted that the situation is challenging due to heightened uncertainty about job prospects and household incomes and these could potentially limit future demand and this could make it difficult to sustain the growth.

He said that the number of withdrawals may indicate the difficult economic conditions that households currently face.

This article has been republished from Property Wire. You can also view this article at
Property Wire, an international real estate news site.

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