Net mortgage lending by the banks may have grown by 0.8% in the year to July according to the British Bankers’ Association, but it was no great surprise to see that the gross monthly figure of £7.1bn had fallen below the recent average. You only have to look at the inertia in the housing market to realise that things have reached something of a stalemate and while the wholesale funding markets are not as inhospitable as they have been previously, restrictions in retail savings markets are still acting to limit lending.
Other factors are also stifling the supply of mortgages. Increased capital requirements continue to prevent lenders from dealing with all but the top tier of borrowers and while concerted efforts have been made to try and lure first-time buyers back to the market, there won’t be a marked shift in their number until the economy as a whole turns the corner and all-round affordability and saving for a deposit becomes less difficult. It is galling for potential homeowners that while house prices have slumped to something approaching an affordable level, obtaining mortgage finance and amassing a deposit is more difficult than ever. What the economy gives with one hand, it takes away with the other.
It is perhaps too early to fully assess the usefulness of the Funding for Lending scheme, but it is a fair assumption that much of the funds from the scheme will be diverted towards lower-risk lending rather than the first-time buyers it is intending to assist. The fact it is only being made available to high-street banks and not the building societies and specialist lenders who are actually willing to do business could serve to further skew the market. The Government may see such financial institutions as a safer bet for their subsidised funds, but it is worth remembering who required a bail-out during the dark days while smaller lenders cut their cloth accordingly and adapted in order to survive.
It is all very well large lenders shifting the blame and expecting their contemporaries to be the ones to make the decisive move and help lift the market out of its malaise, but there has to be a degree of self-accountability too. Taking a leaf out of the book of building societies and specialist lenders in terms of their product innovation and willingness to assess each case on its individual merits would be a start and showing a little more backbone would be welcome. The recent five-year fixed rate war looked like it may be the spark that ignited the competitive fire again, but no sooner had some of the lenders launched their offerings than they were withdrawn again.
Mortgage lending activity won’t return to healthy levels overnight, but the onus is on all of us to help drag the market out of its stupor and not expect others to be the first to poke their head over the parapet.
Steven Nicholas is Chief Executive of Tiuta