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Recent research from the British Bankers Association revealed that mortgage approvals hit their lowest level since their records began in 1997, with less than 28,000 mortgages for homebuyers approved in May 2008 - a figure nearly 60 per cent lower than the same period in 2007. This figure was also 20 per cent down on April and experts are warning that things are only set to get worse. Housing market analysts have warned that these latest figures suggest that the housing market is actually continuing to decline and not stabilize, blaming lenders' increasingly tight lending conditions and withdrawal of products, combined with homebuyers' stretched cash flows for the problems. The fact that approvals were so low in May is also likely to affect UK house prices further, with many analysts now predicting even further falls than they first thought. The general consensus now would suggest that instead of the original prediction that house prices will fall by an average of 10 per cent over 2008, the figure is more likely to be 20 per cent or even worse. Michael Saunders, chief UK economist at Citigroup said that the BBA's figures highlight the 'extreme' weakness of the housing market, and revealed that Citigroup's base case suggests a drop of 20 per cent, but that he would not be surprised if it tuned out to be even worse. Chancellor Alistair Darling has already tried a number of measures in an attempt to make borrowing easier, including injecting cash into the financial system, and now says that the Government will take action if mortgage lenders do not take a sympathetic approach to borrowers who are getting caught out. The average interest rate on a fixed rate mortgage has now hit seven per cent – the highest in eleven years - and the chancellor says that he is concerned that borrowers, especially those whose deals are coming to an end and have to source a new mortgage deal are not being treated fairly. The government has met with the Council of Mortgage Lenders in an attempt to encourage lenders to make borrowing easier, but says if it doesn't happen, the matter will be pursued further by the FSA. But, the lenders have their own problems to deal with. Northern Rock were the first major lender to be negatively impacted by the 'global credit crunch,' and now it seems the issue has spread through the financial system, with the Royal Bank of Scotland and HBOS, and most recently, buy to let mortgage specialists, Bradford and Bingley announcing a rights issue; many in the City believe others such as Alliance & Leicester may follow. But the knock on effect doesn’t stop there – the entire mortgage and housing industry has been affected, with house builders Barratt and Permission both being forced to make redundancies, while Taylor Wimpey has held talks with staff to close 13 of its 39 UK offices, which could cost up to 600 jobs. Daniel Collins writes on a number of topics on behalf of a digital marketing agency and a variety of clients. As such, this article is to be considered a professional piece with business interests in mind.
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