Mortgage Market - Closed for Business

The latest data on the value of UK mortgage lending to the property market is simply staggering - Banks and building societies lent just £143m in home loans in August, just 5% of July’s lending figure and only 2% of the lending in August 2007. The market for home loans has imploded and house prices will take a complete battering unless there is a rebound in mortgage loans

It used to be said that falling house prices are good for improving affordability and giving first time buyers some sense of hope that they can take their first tentative steps onto the property ladder.

But it is becoming obvious that despite falling prices, property is becoming even less affordable and the reason is clear - getting a mortgage is one tough ask.

The huge drop in new mortgage lending is a symptom that people looking for fresh mortgage finance are having an incredibly tough time. It is not simply the mortgage interest rate on the loan, it is whether the loan is available and the size of the deposit required.

Three of the banks most closely associated with the buy-to-let market - namely Lehman Bros, Northern Rock and Bradford and Bingley have all fallen by the wayside.

Until the major banks have taken sufficient steps to re-capitalise either by attracting new deposits or seeking new injections of capital from domestic or overseas investors, then we are very unlikely to see any improvement in the willingness of banks to lend to eachother.

The mortgage market has more than stalled - to all intents and purposes, it is closed for new business. And this spells disaster for thousands of people who livelihoods are inextricably linked to the fortunes of the property sector.

The headlines today are dominated by the nationalisation of Bradford and Bingley. But the real news today is the collapse in mortgage lending. And there was some more bad news today, the LIBOR rate - the interest rate that the banks charge to each other for funds has started to rise again.

This is the central indicator of the credit crunch and it does not look at all good.

Unit 2 Macro: Cyclical and Structural Economic Issues Facing the UK [23 May 2012]
Unit 2 Macro: UK Trade in Services [20 May 2012]
Unit 2 Macro: Bank Cuts UK growth Forecast for 2012 [16 May 2012]
Unit 2 Macro: Monetary Policy and Inflation Glossary [5 May 2012]
Unit 2 Macro: Trade and Balance of Payments Glossary [5 May 2012]
Unit 2 Macro: Fiscal Policy Glossary [5 May 2012]
Unit 2 Macro: Aggregate Demand Glossary [5 May 2012]
Macro Revision - Key Statistics on the UK Economy [4 May 2012]
Robert Schiller - Finance and the Good Society [1 May 2012]
Macro Revision: Putting Things in Context [29 Apr 2012]
Unit 2 Macro: Britain back in Recession [29 Apr 2012]
Unit 4 Macro: The Euro Zone Crisis (Revision) [22 Apr 2012]
Unit 3 Micro: Revision on Nationalisation [13 Apr 2012]
Unit 2 Macro: Revision on Interest Rates and the Exchange Rate [3 Apr 2012]
Posen on slower growth in the UK compared to the USA [30 Mar 2012]
George Buckley at the Millfield Economics Society [28 Mar 2012]
Beyond the Bike - Monetary Policy in Africa [28 Mar 2012]
Unit 4 Macro: Video Resources on the Euro Crisis [10 Mar 2012]
Mortgage interest rates, LIBOR and game theory [3 Mar 2012]
10 Solutions to Binge Drinking [21 Feb 2012]
A return to Glass-Steagall to prevent another crash? A lesson from economic history. [17 Feb 2012]
Unit 4 Macro: King on the UK Economy [15 Feb 2012]
Martin Wolf on Global Shocks [10 Feb 2012]
Trucks are the new way of measuring debt [1 Feb 2012]
Unit 2 Macro: Growth and Development - Some Indicators [30 Jan 2012]
Unit 4 Macro: France loses her AAA credit rating [15 Jan 2012]
Beyond the Bike - The Importance of Remittances [15 Jan 2012]
Unit 4 Macro: Economics of Fiscal Deficit Reduction [12 Jan 2012]
Unit 4 Macro: UK Bond Yields Reach Record Lows [11 Jan 2012]
Unit 2 Macro: Quantitative Easing in the UK [8 Jan 2012]
2011 in Review - The US Economy [27 Dec 2011]
Unit 2 Macro: The UK Housing Market in 2011 [26 Dec 2011]
The Eurozone Crisis Explained (again!) [22 Dec 2011]
Unit 2 Macro: Mobile Phones and African Economic Growth [18 Dec 2011]
Beyond the Bike - The Value of Money [19 Nov 2011]
Unit 2 Macro: Should the EU introduce a Tobin Tax? [14 Nov 2011]
AS Macro: The State of British Business [13 Nov 2011]
Eurozone crisis - a selection of resources [12 Nov 2011]
Unit 3 Micro: UK Executive Pay - All in it Together? [29 Oct 2011]
Can the “invisible hand” solve Africa’s poverty? [13 Oct 2011]
Skidelsky in Madrid [12 Oct 2011]
Why Is Macroeconomics Such A Mess? [11 Oct 2011]
Greek debt decision tree [25 Sep 2011]
Unit 4 Macro: Greek Economy at Default’s Door [25 Sep 2011]
Unit 4 Macro: IMF Flags up Risks of Double Dip [20 Sep 2011]
Mixing with the Nobel Economists [4 Sep 2011]
Unit 4 Macro: Dangers of High Inflation [11 Jul 2011]
Unit 1 Micro: FirstBuy, Affordability and Effective Demand in Property [10 Jul 2011]
AQA ECON4 Context [20 Jun 2011]
A2 Macro: Consumer Spending [30 May 2011]
AS Macro Key Term: Deflation [24 May 2011]
A2 Micro: Oligopoly [20 May 2011]
EU Economics: Comparing the UK with Europe [14 May 2011]
UK Economy Update: What Mervyn Said [11 May 2011]
AS Macro: Extended House Price Deflation? [5 May 2011]
A2 Micro: Innovation in Markets [4 May 2011]
A2 Macro: Chinese investment in the EU [3 May 2011]
AS and A2 Macro Revision: Keynesian Economics [28 Apr 2011]
Focus on Ireland’s Economy [12 Apr 2011]
A2 Macro: Back to Roubini - a Year On! [11 Apr 2011]
OCR F585 June 2011: Euro Area on the Rocks? [11 Apr 2011]
ECB breaks rank and raises interest rates [7 Apr 2011]
EU Economics - Portugal Reaches for Bail Out [6 Apr 2011]
AS Macro Key Term: Fiscal Austerity [6 Apr 2011]
AS Macro Key Term: Expansionary Monetary Policy [4 Apr 2011]
AS Macro Key Term: Fiscal Deficit [3 Apr 2011]
A2 Micro: Updates on Competition Issues [2 Apr 2011]
OCR F585 June 2011: Data Charts (2) [30 Mar 2011]
Keeping Track of UK Macro Objectives [18 Mar 2011]
Why is the Yen appreciating? [18 Mar 2011]
Timetric: Mortgage Lending and Mortgage Rates [14 Mar 2011]
Focus on Japan - Human Catastrophe, Economic Risks [13 Mar 2011]
EU Economics: How far is the Eurozone away from being an OCA? [12 Mar 2011]
Dambisa Moyo - How the West was Lost [11 Mar 2011]
Ireland - Mass Unemployment and Shrinking GDP [10 Mar 2011]
EU Economics: Germany leads Euro Zone revival [25 Feb 2011]
EU Economics - Life at the jagged edge of the Euro Zone [20 Feb 2011]
Challenges facing the London Economy [12 Feb 2011]
Mo Tanweer on Global Currency Wars [10 Feb 2011]
David Smith on Shifting Sands in the Global Economy [8 Feb 2011]
Regulation and the banking industry: reflections from Davos [30 Jan 2011]
Shorting the market - the vultures target HMV [23 Jan 2011]
Economics Q&A: Will the rise in VAT harm the UK’s economic performance? [17 Jan 2011]
Will we have to live with high unemployment? [17 Jan 2011]
EU Economics: Is 2011 the year the euro will fall? [9 Jan 2011]
Economics Q&A: Will the Government spending cuts affect inflation? [3 Jan 2011]
Economics Q&A: Why might Europe’s weaker economies struggle to grow in the next few years? [2 Jan 2011]
Revision: Consequences of Unemployment [1 Jan 2011]
EU Economics: EU Economy in Charts Jan 2011 [29 Dec 2010]
EU Economics: Estonia joins the Euro [27 Dec 2010]
EU Economics: European Fiscal Austerity Measures [24 Dec 2010]
HMV on the brink? [9 Dec 2010]
iLand - Shareholders and Taxpayers feel the Pain [24 Nov 2010]
What You Need to Know About Economics [18 Nov 2010]
The Acid Burns Through - Requiem for Neo Liberalism [28 Oct 2010]
Economist Public Debt Clock [6 Oct 2010]
Jerome Kerviel and the Principal Agent Problem [5 Oct 2010]
Mortgage equity withdrawal [1 Oct 2010]
Irish economy sinks deeper into recession [26 Sep 2010]
Housing market and negative equity [31 Aug 2010]

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