Bank mortgage lending plunges to 1999 levels

Bank mortgage lending plunges to 1999 levels

18:32 PM, 26th January 2011, About 13 years ago

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Bank  mortgage lending slumped to the lowest for more than a decade  during December as the housing market stalled.

New lending dropped to £880 million for the month, the lowest level since June 1999, according to figures from  the British Bankers’ Association.

Only 28,726 mortgages were approved for buying a home in December, which is a return to the level of January 2009.

The year’s mortgage lending by banks was slightly up on 2009 – by 2.8%.

Despite the 44% slide in new business, the BBA is quick to point out that banks are still more active than  building societies and specialist lenders.

David Dooks, BBA director of statistics, said: “The main banks’ net lending rose by £20 billion in 2010, in contrast to lending by all other lenders, which decreased by around £12 billion.

Average bank mortgage is 80% of property value

“However, mortgage demand was weak throughout the year, with 10% fewer loans approved than in 2009.”

The average home purchase loan in December was £143,300, with several house price surveys putting the average cost of a home at about £165,000, which makes the average loan-to-value for a bank mortgage about 80% -85% of a property’s value.

The figures come after the Council of Mortgage Lenders – which speaks for all lenders, not just the banks – said total mortgage advances in 2010 slipped to their lowest level for a decade  to  £136.3 billion.

The figures do not help the bank’s current war of words with Chancellor George Osborne, who is pressing them to increase lending by another £10 billion to homeowners and businesses this year.

He has urged the state-owned banks Lloyds – that includes the Halifax and Bank of Scotland – and Royal Bank of Scotland – which owns NatWest – to comply or the government will order them to sell-off parts of their businesses.

This big questions in the industry right now are:-

1)     Will property values recover when peoples ability to secure new mortgages is restored?

2)     When will the mortgage market recover?

I’ve shared my views in recent articles, what are yours?

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