The extension of the temporary concession on support for property loan interest announced under the UK government’s comprehensive spending review has been welcomed but the sector remains fragile. Property industry professionals said that it is good news that the £200,000 limit on mortgage size and the 13 week waiting period, down from 39 weeks, will now remain in place until January 2012.
But it comes as the latest figures show that lending in September fell 1% compared with August and was at its lowest September total for a decade.
The date from the Council of Mortgage lenders showed loans last month totalled £12 billion, a 7% decline ion September 2009.
‘Lending volumes do not seem likely to increase substantially towards the end of the year. Funding pressures on lenders remain with a resulting impact on consumer confidence,’ said CML director general Michael Coogan.
According to Andrew Stanford, head of Cluttons’ residential consultancy division the austerity measures will mean that there will be a far wider group of households who will be struggling to secure mortgage finance to buy their own homes, a fair proportion of whom would not be considered low income by any statistical measure.
‘While the number of mortgage products has gradually increased, lenders remain unwilling to lend at high LTV ratios and at high income multiples. Such constraints have resulted in a fall in the number of mortgages approved for home purchase which now stands at less than half the number seen pre-recession, and almost 10% down on the same point last year,’ he explained.
‘Furthermore, as more information has emerged on the Financial Services Authority’s proposed new rules on lending, it is apparent that the market for a range of borrowers who would have qualified in more normal times may be more limited than initially anticipated. Additionally, the need for financial institutions to repay the various support schemes and replace the funding with more expensive funding from the open market, which will increase costs of finance and restrict availability, could potentially make the situation worse,’ he added.
It will ultimately lead to a growth in the rental sector of the property market, he believes. ‘The persistence of mortgage lending constraints will expand the cohort of households to whom homeownership will not be an option, and for whom renting will be viewed as a medium to long term necessity.’
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