It is quite difficult to keep up with all the data on mortgage lending. The big three – the Council of Mortgage Lenders (CML), British Bankers’ Association (BBA) and Bank of England – have been taking it in turns to announce some new record fall in mortgage lending for most of this year.
The last week was no exception. Well, actually, the big falls may have actually come to an end now. But the latest data was fascinating, all the same.
According to the BBA, mortgage lending in July was the same as June. So yippee for that. With 105,610 mortgage approvals in July, with a combined value of £11.8 billion, the volume of all approvals was 40 per cent down on last year. More to the point, re-mortgages were 21 per cent down on last year, while mortgages for house purchases were less than half the level seen in August 2007. But this is the statistic to really make you sit up: in July 2008, according to the BBA, 22,400 mortgages for house purchases were approved. In 2002, the total number of mortgages approved for house purchases was around 90,000. In other words, in 6 years the number fell to less than a quarter of the original level.
The CML data, by contrast, illustrated the dramatic change in fortunes for the buy-to-let sector.
Buy-to-let loans in the first half of this year were 18 per cent down on the same period 12 months earlier. The second quarter saw a 21 per cent reduction on the same quarter last year, and a 25 per cent reduction on the peak seen in Q3 2007. New buy-to-let loans, that is to say excluding re-mortgages from the equation, saw a 33 per cent drop on Q2 2007. This contrasts with a 45 per cent fall in the overall mortgage market from the same period.
If anything, Capital Economics understated the situation when it said: “Even if the credit squeeze eases, we doubt there will be a rebound in BTL lending activity. After all, with the economy now slowing sharply and further substantial house price falls expected, this is hardly an environment which can encourage BTL mortgage demand.”
But the most interesting aspect of these reports was emphasized by Shelter. “Between the first half of 2007 and the first half of 2008 the number of BTL mortgages ending in repossession rose by 100 per cent, compared to a 48 per cent rise across the mortgage market as a whole,” it said, after analysing the CML data.
Shelter, being Shelter, chose to emphasise the implications of this data for tenants. Adam Sampson, Chief Executive of Shelter, said: “These figures show the shadow of repossession is no longer just cast over homeowners, but also thousands of innocent renters who have no idea how close they are to eviction.
“Sadly, the impact of repossession can be even greater for tenants, who, despite paying rent on time, can find themselves with very few rights and the first they even know about it is when the bailiffs start banging on the door.”
© Investment & Business News 2013