Hometrack Reports that Mortgages in the UK Will Not Increase in 2011

According to Hometrack, banks in the UK will not increase the amount of loans issued in 2011 due to increased regulatory pressure and a decline in funds. These negative factors are restricting the amount of finance made available to those who need to borrow money.

Hometrack is a mortgage market tracking service that follows trends and recent events in the world of finance and mortgage in the United Kingdom. It has predicted that this year, lending entities will only approve around 1,200,000 mortgages over the course of the twelve months of this year. This equated to there being no change from 2010 to 2011. In addition, this marks a decline in the number of mortgages issued when compared to 2009 as well.

In addition to these numbers, Hometrack has reported that there will be around 575,000 purchases of new and used homes in the UK. This is far away from the numbers which were seen in the UK during the height of the housing bubble in 2007. During that year, there were over 3,000,000 mortgages issued. Back to 2011, Hometrack has estimated that there will be around 355,000 re-mortgages and around 270,000 other sorts of borrowings. These loans will be made based on the properties of homeowners in 2011.

The chief operating officer for Hometrack, David Catt, stated that these numbers are quite a bit different than the numbers which were seen in the past. When compared to just four years ago the numbers predicted for 2011 seem quite small. However, these findings are very significant, since this is likely to mark the beginning of a new era in lending and mortgages.

While 2007 may have been inflated in terms of the number of mortgages issued, it was not terribly off base from previous years. However, as the housing bubble burst, and the mortgages which were made on bad faith were not able to be retrieved, lenders retreated backwards. Unable to recoup the costs of the bad loans the companies had made, the lenders were forced to cut back on all lending, especially to those who seemed to be risky. There has been a new benchmark set in the world of mortgages and lending.

Hometrack continued to make predictions about the year to come, which involved analysing the problems which will be encountered in the restricted securitization market. In addition to this issue, there will likely be wholesale funding problems that will be hard to predict. To back these claims up, Hometrack looks to the Bank of England for other indications. The Bank of England is the central bank for the United Kingdom, and has a monopoly on printing money in England and Wales. It controls the money supply in the other countries which make up the UK.

The Liquidity Scheme introduced by the Bank of England includes £185 billion in funding for the banks and the financial system. The surprise that comes with this funding is that it must be all repaid by the beginning of 2012. Indeed, the pressure that will rest on the shoulders of the banks will be huge, as they are forced to take rapid actions to try to raise funds in order to repay these loans.

Another aspect t of this recent funding problem will be that the FSA’s Mortgage Market Review, otherwise known as the MMR, will be on-going, and most lenders are unlikely to make any drastic changes until the review has been completed.