Mortgage lending in steady rise say banks

Mortgage lending rose slightly in March but borrowers continued to pay off loans and overdrafts, according to the major UK banks.

The number of mortgages approved for house purchases stood at 34,905 in March, up 5% on the previous month, the British Bankers' Association said, adding that low interest rates continued to affect consumer behaviour.   The figures showed that there has been a 5.7% annual drop in lending to non-financial companies by the major banks.

There has been some evidence of the traditional spring bounce in the housing market in recent weeks with estate agents and surveyors reporting a big rise in the number of people putting their homes up for sale.  But the Council of Mortgage Lenders said that activity would still be relatively subdued this year and repeated its warning that lenders' finances were likely to be severely restricted for several years.

The British Bankers' Association (BBA) figures show that gross mortgage lending in March - of £8.7bn - was less than the average of the previous six months.

The number of mortgages approved for house purchases was subdued compared with the latter months of 2009, when there was a surge in interest owing to the final months of the temporary stamp duty "holiday".  But, even though that rush had "worked through" the system, house purchase approvals were still 20% higher than in March 2009.

The continued historically low UK interest rates - and as a result the low mortgage rates - have been seized on by homeowners looking to pay off their mortgages more quickly.  The BBA said that banks were "actively encouraging" borrowers to use any surplus cash to reduce their borrowing.

"Homeowners are reducing mortgage debt by making, or maintaining, higher repayments using the extra cash generated by lower mortgage rates," said David Dooks, the BBA's statistics director.

Remortgaging continued the steady increase seen in recent months, but remained at very low levels, as people stayed on cheap standard variable rates rather than signing up to new fixed-rate deals.

However, various reports have shown that two-year fixed-rate mortgage deals are at their cheapest for 12 months.

Financial information service Moneyfacts said the aver age rate was 4.63% for a typical £150,000 repayment mortgage.

"The open for business sign is back in the window as lenders improve the availability of mortgages," said Michelle Slade, of Moneyfacts.

"Lenders are becoming more active in the mortgage market, which is welcome news for borrowers as increased competition is one of the overriding factors in driving rates downwards."

The best deals still required a 25% deposit, she said, which affected affordability for first-time buyers. 

Posted at 07:45PM Apr 27, 2010 by Kelly Board in Mortgages & Housing Market  |  Comments[0]

Financial Problems Rising in Capital

The number of London businesses facing major financial problems has rocketed in the past 12 months.

Insolvency experts Begbies Traynor today said 23,824 firms in the capital experienced “significant” or “critical” financial distress in the first quarter of 2010.

That was 28% higher than in the first three months of last year as the recession continued to take its toll in London. The number of firms in such distress fell everywhere else in the UK over the 12-month period.

Nick Hood, executive chairman of Begbies Global Network, said: “It is not a pretty sight in London. The City is still not in great shape. Tourism was hit by the bad weather.”

The Begbies Traynor Red Flag report said more than £55 billion of debts held by British firms could spark a “ripple effect” of financial trouble that might threaten economic recovery.

The number of businesses deemed to be in significant or critical financial pain jumped 14% from the final quarter of last year to hit 161,601 in the first three months of 2010, it said.

Begbies said that although the economy appears to be picking up, the failure of one firm could topple several others, and warned that this “represents a real threat to a sustained recovery”.

It is the second successive quarterly increase in numbers of distressed businesses, although the group said about half the latest rise could be attributed to seasonal factors with the rest down to market deterioration.

But the figures also show that the number of companies in trouble was 13% less than the period last year.

Hood said the potential for ripple effects was a particular problem in the recession-hit property and construction industries. According to the research, the number of property services companies listed as in financial distress soared by 42% from the fourth quarter of last year to 16,385. The number of construction firms facing difficulties also rose 30%, to 22,990.

“Of all the sectors in the economy that are under stress, construction and property are by far the most vulnerable,” Hood said.

Posted at 02:00PM Apr 27, 2010 by Marc Stenton in Insolvency  |  Comments[0]