Mortgage lending up in January, but rest of 2008 not looking good
Mixed news from the Council of Mortgage Lenders this week. The organisation claims that UK mortgage lending increased by 11% to £26.5 billion in January, but the outlook for the coming months isn’t so good with lending volumes expected to drop. The director of the CML said this is due to “considerable uncertainty in the housing market” which is possibly the understatement of the year so far.
After an unprecedented decade long boom in the housing market, property prices are now at record levels of unaffordability. The cost of the average home is now hopelessly out of synch with the earnings of the average worker.
That decade long housing boom was fuelled by cheap and easy credit. But now that it’s become clear that lending vast sums of money to anybody who asks without worrying too much about their ability to repay wasn’t such a great idea, the banks are suddenly being much more cautious about lending money.
So, nobody can afford to buy houses any more and even if they could, it’s much, much harder to convince the bank to give them a mortgage. With significantly fewer buyers competing for properties, it’s deeply unlikely that prices will continue to surge ever upwards as they have in the past. In fact, with a growing number of distressed sellers, it’s more likely that prices will start to slide, and if prices look like they’re heading south most sane people will want to sit on the sidelines and see just how bad things are going to get before they think about trying to buy property.
The party’s over boys.