Further Action Needed to avoid Housing Freeze
Advisers have told the government that they must take further action as mortgage approvals drop by half in the past year.
A 50% drop in mortgage lending in the past 12 months and dire predictions by the government's mortgage tsar of a complete freeze in home loans next year prompted calls yesterday for immediate action from the chancellor Alistair Darling to assist home owners.
Data published yesterday showed home loan approvals halved in the year to the end of October.
Data from the British Bankers Association showed lending had fallen in October to its second lowest level since records began in April 1997. The record low was in August when only 21,363 new loans were approved.
Crosby, the former chief executive of HBOS, predicts that more loans will be paid off than new ones granted.
Darling has promised to work on a detailed scheme to adopt the Crosby guarantees that could be sent to the EU for state aid approval in time for next year's March budget. Treasury sources indicated Darling was trying to present a package to the EU before Christmas and lenders urged Darling to move quickly.
Buy-to-let lender Paragon's chief executive Nigel Terrington described Crosby's recommendation as "the single most important measure" unveiled by Darling.
The Council of Mortgage Lenders will publish its own predictions for the 2009 mortgage market next week. It had previously warned that it expected the mortgage market to halve this year.
Crosby noted that the lack of mortgage finance has implications that go beyond homeowners. It is having an "immediate and severe impact on house builders".
But he said the "real risk" is that the market "overshoots on the downside" as house prices fall too fast. "Such a downward spiral would have serious consequences across all segments of the housing market and across all industries dependent on housing activity," he said.
He believes the impact will also be felt by the more vulnerable members of society. "The effect would be felt most acutely in the overall number of housing starts and more specifically in lower-priced housing in the least expensive localities," said Crosby.
www.theguardian.co.uk
(Wednesday, November 26, 2008)