Number of new mortgages drops as double dip recession gets ever closer

Even though a two-year peak was seen in September, over the course of last month the amount of gross mortgages declined, adding to the experts concerns that house values are going to start to fall again as the economy in Britain continues to weaken.

New figures released from the Council for Mortgage Lenders (CML) reveal that gross lending for the commercial mortgage and home mortgage market sat at £13.1 billion for the month of October which was a 4% decline from September’s rosier outlook.

It is most likely that September’s figure was a bit inflated however as many borrowers rushed out to get better fixed mortgages before the rates started to jump up again.  In fact, during September most mortgage rates were as low as they had been for two decades perking the interest of many potential re-mortgagers who had enough equity in their homes to actually complete a transaction.

Despite the brief jump in mortgage lending it is still much lower on the CML activity scale when compared to lending levels that were common before the recession.  In fact, the lending total for this year in the third quarter was estimated at £39b which is much less than the third quarter of 2008 when it was £61b.

October was not a great month for the mortgage market anyway, as many people were reluctant to take advantage of the best mortgage rates due to many gloomy economic indicators that damaged their confidence in purchasing a home such as the eurozone crisis, high levels of inflation, and the effect of rising unemployment.  Many banks also were forced to hike up their mortgage rates a bit as they were unable to fund loans since the eurozone crisis froze the money markets.

Overall, mortgage rates are not expected to rise substantially until 2013, but the October lending levels reflect that the economy is weakening which will hurt the demand and recovery of the housing market.  Economist for HIS Global Insight Howard Archer stated that they expect to see house prices duck back down by about 5% before the middle of 2012.

He also added that there will be more risks added to the mortgage market such as the weakened labour force and large concerns over how much banks are going to be able to lend to homebuyers in the face of poor wholesale funding.



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