Bank mortgage lending 'subdued'
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Figures from the British Bankers Association (BBA) show that its members approved 44,000 new mortgages for house purchase in January. Although that was up slightly from December's figures, it was still 31% lower than a year ago. However remortgaging, where people change lenders but do not move home, amounted to 49% of all new lending by the banks last month. Refinancing deals Fixed rate deals, lasting two or three years, have been very popular in the past few years. Now that many of such deals are coming to an end, borrowers have to make a decision to stay with their current lender or find a better loan elsewhere.
"Higher gross mortgage lending in January largely reflected very strong remortgaging activity, as borrowers sought out the best deals available," said the BBA's statistics director, David Dooks. "Although house prices and new loans for house purchase, appear to be subdued as the housing market slows, the strength of remortgaging would suggest competition for mortgage business and switching remains high," he added. The growing prominence of remortgaging business for lenders was noted earlier this month by the Council of Mortgage Lenders (CML).
Financial squeeze The CML and other experts have warned that the crisis in the financial markets, and the continued reluctance of banks to lend to each other, may lead this year to a substantial cut in the amount of money available to lend to would-be home buyers, and higher rates for others. The past week has seen the disappearance of most mortgage deals for loans that are bigger than the value of a house. For instance, the troubled Northern Rock withdrew its high-profile 125% home loan deal that had accounted for a large chunk of its lending last year. And many other lenders are tightening their lending criteria by demanding larger deposits than before from their borrowers, or demanding a higher rate for mortgages which are for a higher proportion of the property's value. The Nationwide building society has recently raised its interest rates for mortgages which are between 75% and 90% of a property's value. The lender is adding a further 0.2% to the prevailing interest rate, so a two-year fixed rate deal will now be charged at 6.05% instead of the 5.85% rate charged for loans for less than 75% of the valuation. |
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