Although the Council of Mortgage Lenders states that the market is stable, figures show that mortgage lending is down by 6% over the same period from last year. CML admits that the market is subdued, but further analysis indicates that it is down another percentage point from June to July.
In terms of gross mortgage lending, figures show that there was a drop of 1% in July from £12.68 billion in June 2011 to £1.6 billion in July. Much of this is due to the stagnation of the housing market as the economy is still faltering. In terms of finance, this means that UK interest rates will most likely remain low for a longer period than projected. House sales will probably decline even further during the next several months, according to Bob Pannell, chief economist for CML.
This may sound like dire news, but it is actually quite encouraging because it means the enormous amount of mortgage debt is slowly being chipped away. As fewer mortgages are being issued, more are being paid proportionately. What one mortgage broker noted was the fact that borrowers are taking advantage of lower interest rates to pay off their mortgages much earlier. Added to the fact that fewer new mortgages are being issued, this means that lenders are not re-lending the money coming in.
The bottom line is that this is good news indeed for the economy as the debt is being whittled away, but not so good news for mortgage lenders who are in need of new loans to keep their revenues coming in. Consumers are shedding debt which may improve buyer confidence, but at the moment it has caused the mortgage market to all but stagnate.
Economists advise that with a bit of shopping around, borrowers can find the lowest rates without paying exorbitant fees. It will take a bit more time, but armed with this information, it is possible to get a mortgage at historic low interest rates.