According to the British Bankers Association, there was a 39% drop in number of mortgages offered by big banks in the UK during April 2008 over the same period last year.
According to the British Bankers Association (BBA), the volume of mortgages provided by big banks in the UK declined by 39% in April 2008 from the corresponding month last year and slightly above from March 2008, as reported by Mailonline.
The BBA disclosed that the High Street banks approved only 38,704 fresh home loans in April 2008 against 65,000 loans in April 2007. But April 2008 loan figure was higher by 3,000 as compared to March 2008 figure, though still not enough to revive the declining UK housing market. Moreover, there were almost 74,722 homebuyers who took remortgage loan in April 2008, representing a 10.7% increase from April 2007.
The main reason for drop in mortgages is that the UK banks withdrew thousands of mortgage deals and enforced stringent new rules for home purchasers to qualify for a mortgage loan. As a result, home buyers desisted from taking home loans in April 2008 due to the fear of paying extra money on account of high interest rates. The resultant ‘payment shock’ added to the financial suffering for thousands of people already struggling to tackle the soaring prices of petrol, provisions, utility and other essential commodities.
The slump in home purchase loans was forestalled by a rise in the volume of individuals remortgaging in the UK. The majority of these people has come to the end of an affordable fixed rate and discounted mortgages and has been compelled to move to deals with high monthly repayments. Hence, the new mortgages are not being availed by people.
The Bank of England has pumped £50 Billion into the UK banking industry in an attempt to help the industry come out from lending paralysis by exchanging mortgage loans with gold-plated bonds issued by the government. However, recent figures indicate that the banks are safeguarding their profits instead of supporting the government and Bank of England plans.
According to a Research Analyst at RNCOS, “The inward pressure on purchasing power of prospective home-buyers in the UK housing industry and decline in home prices will not get comfort from weakening financial and labor market position. Thus, the UK house sellers can presently use methods like easy repayment deals to woo consumers towards the sliding market.”
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