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Mortgage Applications and Home Loans Are Achieving Drops
Halifax has said that the number of mortgage applications approved dropped by 35 per cent in the three months to the end of 2007, according to data from the Bank of England. The number of people who can remortgage has also suffered.
Although the cost of housing also decreased over that time to December, it seems that the elevation in interest rates over the preceding two years combined with the widespread effects of the credit crunch has led to more providers turning down applications for mortgages.
While this has added more fuel to the fire for those who believe that the housing market could collapse, most property professionals think that this will be avoided due to a vibrant job market and the prospect of at least one more interest rate cut to follow the one announced by the Monetary Policy Committee of the Bank of England last Thursday.
Further proof that the property market is slowing is provided by The Council of Mortgage Lenders. The CML saw the number of home loans drop by 22 per cent from November to 62,000 in December.
This reduction was blamed on more stringent policies from those seeking to lower the risk of lending during the current credit crunch, the introduction of HIPs (home information packs), and higher mortgage repayments.
However, Michael Coogan, director general of the CML, said, "The decline in lending appears to be driven more by funding constraints than lower consumer demand. Affordability has been stretched further in 2007 but the recent base rate cuts and the expectation of future cuts will ease debt servicing burdens in 2008. For first-time buyers, the combination of subdued house price inflation and lower mortgage rates means affordability should ease slowly as the year progresses.”
The CML also found that a mere 59,000 homes were able to remortgage last December, plunging to the lowest level for the past six years, as fewer people were able to borrow money against the value of their house.
It’s not all doom and gloom though, providing one takes appropriate action to find help with debt management combined with the recent interest rate cuts. The effects of these are not immediate and ought to slowly come into effect over the course of 2008.
Remortgage News posted on 15 February 2008
