Just get used to tighter lending in the property sector, financier claims | Europe | News

Just get used to tighter lending in the property sector, financier claims

Friday, 01 April 2011

Tighter lending conditions in the mortgage market since the financial crisis are only likely to cause a temporary drop in housing market activity, according to Bank of England policymaker David Miles. Requirements for larger mortgage deposits from first time buyers were likely to lead to low transaction levels for several years, but this should recover once purchasers got used to saving more for a deposit, he explained in a speech to the Home Builders Federation in London. Monthly mortgage approvals in Britain have hovered just below 50,000 since the financial crisis, compared to levels of 80,000 to 90,000 during the previous decade. House prices are still 20% below their peak in real terms, and would probably be even lower if the fall in mortgage approvals was thought to be permanent, Miles said. A rise in deposits required from buyers would lead to a permanent rise in the average age of first time buyers and a fall in the home ownership rate, neither of which Miles said should make people worse off. An increase in average deposits to 10% from 5% would cause a four year hiatus in housing market activity and a similar rise in the average age of first time buyers, assuming they did not save at a faster rate, Miles estimated.

via propertywire.com