Demand for mortgages subdued despite increased lending

| September 26, 2012
Demand for mortgages subdued despite increased lending

Banks and building societies have significantly increased levels of mortgage lending according to a Bank of England survey.

Mortgage lending increased significantly in the three months to September and is expected to rise again in the final quarter.

However, demand from buyers in the three months to September was subdued, with falling housing prices having a negative effect on availability.

The growth in lending follows improved funding conditions for lenders, including the £80 billion Funding for Lending scheme, a joint initiative by the Government and the Bank of England, designed to boost the availability of credit to individuals and businesses.

The Bank of England said that borrowing rates have started to fall as a result of the scheme but it also warned that ongoing difficulties in global economies will continue to weigh on markets.

Demand from people seeking loans to purchase a property is expected to increase slightly in coming months, particularly for buy-to-let mortgages.

Earlier this week deputy prime minister Nick Clegg revealed plans to allow parents and grandparents use future lump sum payments from their pensions to guarantee mortgages for younger family members.

However, in the light of the current pension crisis in the UK, the plan has attracted widespread criticism.

Ros Altmann, director general of Saga said it was a “very strange idea” while Joanne Segars, chief executive of the National Association of Pension Funds, said the idea made her “slightly uneasy”.

Otto Thoresen, director general of the Association of British Insurers, said: “Pensions are designed to mature into a decent retirement income, not for other purposes.

“Any scheme which uses pensions as a guarantee must ensure that it does not inadvertently make the saver worse off when they retire.”

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