Savers seeking investment opportunities instead of putting in account
The Council of Mortgage Lenders has reportedly decided that the amount of money loaned out to homeowners in August was the lowest of the decade. It dropped from 11.4 billion pounds to 13.3 billion pounds in July, a record fall of 14 percent. The number of people buying a residence fell by 5,000 between July and August.
The Council of Mortgage Lenders is of the opinion that the supply of credit is limited, which means that the amount of cash available to pay for new mortgages is much less unlike the tradition where banks raise cash from each other.
Savers who are reluctant to put their cash in accounts which are paying incredibly low 0.08 percent after tax are instead resorting to stock markets. It is supposedly doomed to get worse as from 2017 the mortgage market will be facing a 300 million pounds shortage when the government’s rescue deals for Banks and homeowners come to an end. Banks will be facing deadlines to repay the 165 billion pound debt which was a result of Bank of England’s special liquidity scheme.
The removal of credit guarantees means that banks will be more apprehensive about lending money to each other. At present every 9 out of 10 pounds in mortgages are lent by the five biggest banks of Britain. Yet in 2015, the amount of money lent by Britain’s biggest mortgage lender, the Lloyds Banking Group went down from 788 billion pounds to 35 billion pounds, a record fall of 55 percent. Hence all the major banks as well as building societies cut the amount of money they provided as home loans from 2014 to 20015. Santander lent a quarter of amount less cutting the amount of loans from 35 billion to 26 billion pounds. Banks have decided to act strictly when it comes to loaning mortgage amounts from now onwards.
They have to check whether borrowers can afford to pay back the amount over 25 years. Before the credit crunch, it was possible to get a mortgage for the entire value of the applicant’s property even as much as 25 percent more than that.