Mortgage Demand Drops
By randomguy. Filed in Random |
A new report from the Bank of England indicates that the amount of equity ”released” from property during the second quarter of this year stands at -£2.76 billion - the first negative number measured on the survey since 1998. This shows that more equity was put in to property than released from it during the three-month period.
The increase of equity is also the highest since the Bank started taking records thirty-eight years ago.
This cautious attitude among homeowners may be attributed to the recent decline of the UK property market. Recently released figures from Nationwide, indicates that house prices have dropped for the past eleven months in a row, and are currently around 12 percent less than they were at the peak of the market last year.
Lenders have additionally markedly tightened their rules for borrowers applying for credit – which includes secured loans- due to the credit crunch, which has deteriorated over recent weeks with the nationalisation of Bradford & Bingley and the takeover of HBOS. Property equity withdrawals over the first quarter this year stood at £5.24 billion.
The Bank of England’s Credit Condition report shows "expectations for house prices and concerns about the economic outlook" led banks and building societies to reduce the amount of mortgages available. Over the next few months the mortgage crunch is widely expected to continue as wholesale funding conditions also tighten and banks lose their appetite for risk. Unsecured credit – the form of personal loans, credit cards and overdrafts – also diminished.
The Bank of England also revealed demand for mortgages and remortgages "declined sharply" over the three months and demand was expected to fall further. The survey of lenders also revealed an increase in default rates on mortgages and loans and more and more people unable to repay their debts is expected as the economy continues to struggle.