Mortgage Lending Continued To Fall During August
The latest figures from the Council of Mortgage Lenders showed Mortgage lending continued its downward spiral in August
The total value of new lending was £21.8bn, down by 12% from July and 36% lower than in August last year.
The CML said it was the lowest monthly figure since April 2005 and the lowest August figure since 2002.
It blamed the continued fall in mortgage lending on “exceptionally low housing market turnover.”
The CML’s director general, Michael Coogan, warned that lending would remain low in the months ahead.
“These figures reflect the heightened uncertainty for both lenders and consumers in the mortgage market at present,” he said.
“Lenders are uncertain about future sources of funding and the cost of funding, while consumers are unsure about how much further and for how long house prices will continue to decline.”
Gloomy prospects
There seems little doubt that sales and prices will fall further in the next few months.
Sales are already down by a half over the past year, while mortgages approved but not yet lent have fallen by 71% on the levels of a year ago.
This suggests that actual sales may soon drop even more.
Andrew Montlake, of mortgage brokers Cobalt Capital, said the latest CML figures were grim, but not surprising.
“They are a reflection of the near standstill the property market now finds itself in,” he said.
“In some areas, you could count the number of property transactions in August on one hand.
“And although August is always a fairly quiet month, it could be a few months before things start to pick up given the events of the past few days,” he added.
All surveys of house prices now suggest that on average they are lower than they were a year ago, with the most widely followed surveys published by the Nationwide and Halifax both showing a drop in prices of 11% during the past 12 months.
The latest crises in the financial markets, and the sudden takeover of the Halifax bank - the UK’s biggest mortgage lender - may make more people less confident about borrowing, which could extend the current sharp downturn in the property market.
New Rules to Combat Mortgage Fraud
New rules have come into force to stop mortgage lenders becoming the victims of over-inflated property valuations.
From now on, developers and builders must reveal if they have offered incentives, such as cash-backs, fitted kitchens or paid-for legal fees to buyers.
Lenders are worried these incentives have led to some properties being sold for more than they are actually worth.
In particular they have been worried about newly built city-centre flats, whose prices have now slumped.
The new rules for the conveyancing industry have been issued by bodies such as the Council of Mortgage Lenders (CML) and the Royal Institution of Chartered Surveyors (Rics).
They have also been supported by the Law Society of England & Wales, the Home Builders’ Federation, Homes for Scotland and the Construction Employers Federation.
Builders or developers of any newly-built, converted or renovated properties will have to complete a 12-question form, revealing to lenders and surveyors any incentives they may have given to buyers.
Buyers, lenders and valuers have all been victims of the non-disclosure of incentives by developers with many buyers left with a mortgage worth more than the property’s real value,” said Barry Hall of Rics.
The CML said this would ensure that any mortgage was granted on an accurate valuation of a property, not one that was fraudulent.
“If developers ensure that they are transparent, and disclose any discounts or incentives on offer to buyers, lenders’ confidence should start to return,” said Michael Coogan of the CML.
The issue was first raised by the CML in February this year as the slump in mortgage lending started to grip the property market, leading to a sharp fall in values.
It said at the time it was worried that lenders were being duped into lending too much money by headline valuations that disguised the fact that the buyer might have been receiving thousands of pounds worth of incentives from the developer.
Some lenders now no longer lend to people who wish to buy newly built city-centre flats.
In some parts of the country, such as Manchester, Birmingham, Leeds and Nottingham, this has led to a highly visible glut of properties which can no longer find a buyer at their original price.
The government’s own house price index, published by the Department for Local Government and Communities (DCLG) said that the price of flats in the UK had fallen by 3.6% in a single month between May and June.
Overall property prices are now down by 10% since the start of 2008 and widely anticipated to fall much further in the next 18 months.
