Money lenders still money-grabbing

MORTGAGE lenders – having promised government to return to 2007 levels of business – are still lending substantially less than last year and charging substantially more than necessary.

The Council of Mortgage Lenders (CML) reports gross lending totalled £17.7 billion in September, 10 per cent lower than in August and down 42 per cent from September last year.

The bankers and building society bosses insist the mortgage market remains open for business, but claim weaker consumer demand and ‘continuing funding constraints’ will dampen monthly lending figures for rest of this year and the first quarter of 2009.

In fact, gross lending will be substantially lower than the 2007 total of £363 billion, and is expected to reach around £255 billion in 2008.

The lenders are also failing to respond to the dramatic Bank of England interest rate cuts. Darren Cook, mortgage expert at Moneyfacts.co.uk, said: “Two weeks after the Monetary Policy Committee announced a shock 0.5 per cent cut to the base rate in unison with key central banks around the globe, more than three quarters of all UK lenders have yet to pass on this reduction to their ever growing number of standard variable rate mortgage customers.

“With mortgage approvals falling to rock bottom levels and house values continuing to fall to unseen troughs, it is unlikely that mortgage lenders will soon regain their appetite to lend at reasonable levels in the short term.

“Unfortunately, within this increasing turmoil, the majority of customers currently have no alternative but to switch to their lender’s standard variable rate (SVR)

“Some lenders have announced a reduction in their SVR and have reduced their rate by the full amount. However, a growing number have chosen not to do this and only passed on a proportion of the cut or none at all.

“A mortgage that was previously known as only a revert rate, due to circumstances, has become a prime product that could be adversely priced at will.

“With more base rate cuts on the horizon, which in part are intended to reduce the burden of household finances, we could find ourselves in situation where future MPC decisions on a rate cut will have little or no bearing on the majority of current household’s mortgage outgoings and could ultimately result in an increase in repossessions.”

The CML acknowledges more borrowers are facing long-term unemployment and other financial difficulties are at risk of losing their homes.

The lenders fight shy of taking any responsibility for dealing with the situation and want government action to ‘build a more comprehensive safety net of support for home-owners in difficulty’.

Instead the CML is attempting to set the tone for the post-crunch debate when it predicts policy and regulatory initiatives will have an impact on the number and types of households that are able to enter – and sustain – home-ownership.

In a ‘think-piece’ on its website it says: “While we recognise the strength of aspirations to home-ownership and the many benefits it delivers, we also acknowledge that it is not the tenure for everyone all of the time. The real challenge is deliver a healthy balance of tenures, providing a choice of affordable housing options.

“One response to balancing aspirations to home-ownership with risks for more marginal borrowers may be more widespread availability of an intermediate tenure. In the longer term, we see a potential for expanding low-cost home-ownership and for households to be able to lower or raise their level of home-ownership according to their changing personal circumstances.

“That would be one way of managing the higher risk profile of mortgage lending as a result of extending home-ownership lower down the socio-economic spectrum.”