Lenders are tightening up!

The Council of Mortgage Lenders has reported that gross mortgage lending reduced by 14%, to £11.4bn, for August. This is the lowest August lending figure since 2000 reducing from £13.3bn in July. Further signs that restrictive lending is rapidly becoming the norm!

The buoyant Buy to Let market has been dealt a blow this week as Lloyds Banking Group (LBG) have restricted the number of Buy to Let mortgages a single applicant can have within the group to just 3 properties with a maximum lending of £2m. This is a reduction from 9 properties and £3m previously. Portfolio owners within the group, which includes Halifax, C&G, BM Solutions, Bank of Scotland and Lloyds TSB, are now restricted to the 3 properties rule and have to look elsewhere to increase their portfolio. This move puts further pressure on the few remaining lenders offering Buy to Let mortgages and some of these are already creaking with the pressure of increased business, announcing delays of up to 20 working days.

The Bank of England has issued its justification as to why lenders have not passed on the full benefit of low interest rates to consumers. In its quarterly bulletin, the Bank indicates that some new lending rates have actually risen whilst base rate has fallen! They blame this on lenders seeking to build larger financial reserves, funding costs and credit risk balances, among other things. The report says lenders are seeking to rebuild net interest margins achieved, in part, through higher mark-ups on new lending. Perhaps one word could more easily describe these. Profit! We have seen billions of profits reported for the half year from many lending institutions so perhaps it is fair to question if this is now greed? Someone needs to get tough! The question is, if the Bank of England is happy to stand behind banks making extortionate profit: if the FSA are now to be part of the Bank and the Government has taken a side step, is there anyone left to champion the consumers cause? No doubt we will see the bankers refusing their Christmas bonuses this time in order to help the cause..