New mortgage lending could fall below zero

| November 25, 2008 | 0 Comments
New mortgage lending could fall below zero

The British Bankers’ Association has published figures for mortgage lending in October, showing a monthly 3% rise in the total value of mortgage approvals, to £11.9 billion.

Total lending was, however, 38.2% lower than during October of last year.

The number of mortgages approved for house purchases declined in volume to 21,584, down from 23,383 in September or 52% year-on-year.

Meanwhile, Sir James Crosby, author of the Government commissioned Crosby Report on the UK mortgage market, has warned that net new mortgage lending may fall below zero next year.

This would occur if repayments and redemptions exceed the value of new mortgages and therefore does not mean that house sales would grind to a complete halt.

Sir James is keen to see the Government provide temporary guarantees of new mortgage-backed securities as a means of enabling lenders to finance their businesses by borrowing on the wholesale money markets.

Such a move would need EU approval but without the intervention, Sir James is predicting that net UK mortgage lending will be in negative figures in 2009 and make only a modest recovery in 2010.

By way of comparison, net new mortgage lending is expected to total around £40 billion in 2008, down from £108 billion in 2007.

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