Continued economic uncertainty dampens borrower enthusiasm

"The continuing economic uncertainties both in the UK and in the Euro area are having a dampening effect on activity within firms and households.

"Households are reducing borrowing requirements and have no appetite to take on more/new debt. Where they can individuals are putting money aside for household expenditure. Firms are holding back on borrowing for investment until trade prospects improve."

David Newnes, director of LSL Property Services, owners of Your Move and Reeds Rains, comments: “September’s tiny rise in mortgage lending does little to mask the underlying problems still embedded in the mortgage market. The reality is that borrowing conditions are still adverse for the average new buyer as lenders adopt a conservative approach. With funding conditions difficult, banks have been waiting for economic conditions to improve before boosting lending, prioritising balancing their books in the meantime, and this has been most keenly felt by buyers at the lower end of the property market.

We’re still too close to the launch of the Funding for Lending scheme to see it feed through into significantly improved lending figures, but there is a strong chance it may spur lenders into action in the final months of the year. However one of the key stumbling blocks in the current market is the amount of capital lenders are required to keep for each loan, a ratio that grows the higher the LTV. Even with the Funding for Lending scheme, until this changes it’s difficult to see lenders able to lend to anywhere like the number of first time buyers as before the credit crunch.”

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