UK Gross Mtge Lending Eases To GBP10.3B In May - CML

inspector_monkfish

09:30 18Jun09 UK ESTIMATED MAY GROSS MORTGAGE LENDING GBP10.3B
09:48 18Jun09 UK Gross Mtge Lending Eases To GBP10.3B In May-CML

UK Gross Mtge Lending Eases To GBP10.3B In May-CML



LONDON--U.K. gross mortgage lending eased in May, but it is likely that very low remortgaging volumes masked a slight improvement in lending for home purchases, data from the Council of Mortgage Lenders showed Thursday.

Gross mortgage lending - which includes both lending for house purchase and remortgage - fell to an estimated GBP10.3 billion in May from GBP10.5 billion in April, leaving it 58% lower on the year.

Although recent signs from the house market have been encouraging, the CML didn't expect a significant recovery in activity in the coming months, CML economist Paul Samter said in a statement.

"Lending volumes appear to have stabilized at extremely low levels, but the weak labor market and lenders' limited access to funding will constrain activity for some time yet," he said.

"Underneath the headline gross lending figure, it's likely that a moderate improvement in house purchase lending in May has been offset by very low remortgaging volumes as borrowers stay with existing deals," he added.

CML Web site: www.cml.org.uk

System

I would expect to see a boost going forward as the news of fix rate increases encourages people to remortgage from their SVR.

ad9898_3

What this information seems to say is that many people are falling back onto SVR's from there current deals because they can't remortgage due to unaffordability of current deals or lack of equity in there homes. I don't think we can unestimate what future rate rises will do to the market, many people are being saved at the moment by the low rates.

StevieJ

ad9898 wrote: »

What this information seems to say is that many people are falling back onto SVR's from there current deals because they can't remortgage due to unaffordability of current deals or lack of equity in there homes. I don't think we can unestimate what future rate rises will do to the market, many people are being saved at the moment by the low rates.

Or the fact that their SVR is so low

System

Er, you don't think people are falling back onto SVRs because it's massively cheaper then?

ad9898_3

StevieJ wrote: »

Or the fact that their SVR is so low

Of course, that as well, but I did say many, not all.;)

ad9898_3

Joeskeppi wrote: »

Er, you don't think people are falling back onto SVRs because it's massively cheaper then?

Fair point, that I acknowledged in my reply to Steve, however I would argue that quite a few SVR's aren't massively cheaper, quite few are close to 5%, which of course are cheaper compared to 7%+ of last year. I think we saw many people especially at NR really struggling on there SVR, the reduction in rates saved a hell of alot of them, I even have a close friend who was one of those such people.

ruggedtoast

Its cheaper on an SVR because the taxpayer is effectively subsidising peoples loan repayments. That wont go on forever.

Nor should it.

chucky

ad9898 wrote: »

What this information seems to say is that many people are falling back onto SVR's from there current deals because they can't remortgage due to unaffordability of current deals or lack of equity in there homes. I don't think we can unestimate what future rate rises will do to the market, many people are being saved at the moment by the low rates.

i'd see it as many people are falling back on SVR's because it's cheaper and they're taking advantage of a once in a lifetime opportunity not because they can't afford mortgage deals or lack of equity.

seeing that only between 7% and 10% are in negative equity would that really have any impact?

who would future rates rises really affect? only people that have recently taken out mortgages or those that have been unable to remortgage - with current low volumes, would it have a big impact?

Generali

chucky wrote: »

who would future rates rises really affect?

- People with debt at variable rates (eg CC, mortgage) who are either struggling currently or who have something bad happen to impact their ability to service their debt.
- BTL (reduces the attractiveness of the investment unless rents rise also - if rates rise because the economy is doing better it is reasonable to expect rents to rise too, if they rise because of the huge amount of Govt borrowing it is not)
- Builders/developers: again reduces the profitability of their investment. This would serve to increase short term prices (or cause them to fall by less) unless rising rates were enough to bankrupt them altogether in which case there'd be a lot of forced sales putting pressure on prices
- FTBs could be priced out if interest rates rise enough.

So conflicting effects and it depends which are stronger and which are weaker. My suspicion is that rising rates will snuff out a recovery. It's just a guess though.

chucky

Generali wrote: »

- People with debt at variable rates (eg CC, mortgage) who are either struggling currently or who have something bad happen to impact their ability to service their debt.
- BTL (reduces the attractiveness of the investment unless rents rise also - if rates rise because the economy is doing better it is reasonable to expect rents to rise too, if they rise because of the huge amount of Govt borrowing it is not)
- Builders/developers: again reduces the profitability of their investment. This would serve to increase short term prices (or cause them to fall by less) unless rising rates were enough to bankrupt them altogether in which case there'd be a lot of forced sales putting pressure on prices
- FTBs could be priced out if interest rates rise enough.

So conflicting effects and it depends which are stronger and which are weaker. My suspicion is that rising rates will snuff out a recovery. It's just a guess though.

there is an endless list of people it will affect.

a more general view is that it affects people who could not afford pre-credit crunch and those who took out lending post/during credit crunch. the latter is going to be very small.

rising rates won't snuff out recovery but maybe 'flatten' it out, a slightly less pessimistic view than yours

in saying that rates will also depend on inflation etc...