18 June 2010

The task ahead is not to be envied...

With less than a week to go before the new coalition emergency budget is announced pundits, all and sundry, are in full flow trying to predict what the Chancellor will implement to try and correct the country’s financial nightmare. The task ahead is not to be envied!

On the mortgage side, there are many potential issues on the horizon. Not least the fact that a certain small sum of around £300bn was advanced to a number of banks over the last 2 years and which is due to be repaid in the next two years or so. To put this in to perspective, circa £300bn was the total amount lent in the UK by financial institutions in 2007! With quantitative easing a distant memory, banks and financial institutions are working out ways to ensure their loans via the Special Liquidity Scheme are repaid within the deadlines. Could this mean we see further restrictive lending, on an already tight market, in order to meet these demands? In comparison to the 2007 figures, it is predicted that 2010 will show gross lending figures in the region of just £140bn…

With this in mind, mortgage lending in May saw a reduction in the number of First Time Buyers. Figures from the Council of Mortgage Lenders advised that First Timers accounted for 35% of house purchasers in May, down from 39% in March and 38% in April. Although many lenders are targeting First Times Buyers, the actual reality of them obtaining a mortgage is still problematic and depends heavily upon the amount of deposit, the interest rate and affordability, all of which can be potential issues.

In addition, according to Marketguard, if and when the Bank of England base rate starts to increase, some 7% of mortgage holders are already saying that won’t be able to meet their required mortgage repayments. If correct, this is a frightening statistic!

The Chancellor has a huge task ahead of him trying to reverse the UK’s ever increasing financial deficit whilst at the same time keeping consumer confidence high and ensuring the Banks and Financial Institutions continue to increase their lending. With such an inherited nightmare, personally, I think he has more chance of winning the lottery!

No comments:

Post a Comment