The outlook for the mortgage
market, appears to be gloomy according to industry figures.
Speaking earlier this week, at a conference for the mortgage industry in Manchester, Jackie Bennett, head of policy at the Council of Mortgage Lenders (CML), stated that there are fears that the situation in the UK, could be heading in the same direction, that the US mortgage market is, downward.
Bennett also quoted CML chief Steven Crawshaw, as expecting the level of mortgage lending to fall by half through 2008, with a 30 per cent drop in business activity among lenders.
Bennett said: “The appetite for lenders to top best buy tables has drastically diminished. Due to the servicing problems being top now attracts, lenders are fighting to avoid the top spot, rather than competing to be there.”
Bennett also stated the situation for first-time buyers, is similar to the mortgage rationing that occurred in the 1980s, when new entrants to the housing market found it almost impossible to secure home loans.
Many of those who have managed to clamber onto the property ladder in recent years are not out of the woods yet, however. There is a very real threat of repossession for those homeowners that will feel the financial squeeze of increase repayments as they come off attractive two-and three-year fixed rates over the course of 2008. Although, Bennett offers reassurance to homeowners fearing repossessions though.
She said: “Lenders are bound by regulation from the Financial Services Authority, which dictates that they must treat customers fairly.”
Economist John Wriglesworth, stated that things in the mortgage market won’t improve any time soon. He said: “The market won’t recover until the end of 2009. Within the next six months, lenders may revert to a model adopted in the 1980s whereby potential borrowers were expected to save with a lender for six months before a mortgage was offered.”
He continued: The one bright spot among all this is the fact that lenders want to attract more savings business to fund their mortgage lending. As a result, many banks and building societies now offer very competitive savings account. If buyers are considering putting their plans to buy or re-mortgage on hold until product rates fall slightly, it is probably worth, finding a good account that will not only safeguard their deposit, but one that will help it grow while they wait.
However, some mortgage providers, have seen positive situations within the industry. High street bank and mortgage provider, Abbey has reduced the rates on all their flexible and tracker-rate mortgages by 0.05 per cent, in addition to reducing some fixed rates by up to 0.17 per cent for borrowers with higher deposits.
A spokesperson for Abbey Mortgages said: “The current mortgage market poses an opportunity for financially strong lenders such as Abbey.”
The spokesperson continued: “Last month we announced a UK net lending share of 16 per cent and since then we've seen an exceptionally strong pipeline of new business, as well as continuing to benefit from the improvements we've made in retaining our existing mortgage customers.”
He concluded: “Abbey had already decreased rates on its flexible rate and tracker mortgages by 0.1 per cent in response to the Bank of England's recent cash injection. This additional 0.05 per cent reduction anticipates future falls in LIBOR and will further support the Bank of England's action in helping to bring liquidity back to the UK mortgage
market.”
