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The housing market is cooling - Nationwide | The housing market is cooling - Nationwide |
(35 minutes later) | |
I have just got off the phone to Graham Beale, the chief executive of Nationwide, about his results this morning that show gross and net mortgage lending down. | I have just got off the phone to Graham Beale, the chief executive of Nationwide, about his results this morning that show gross and net mortgage lending down. |
He explained the two trends which are influencing the housing market. | He explained the two trends which are influencing the housing market. |
And they are both pulling in different directions. | And they are both pulling in different directions. |
Firstly, the major high street banks are back lending to householders after years of withdrawing from the market and repairing their balance sheets. | Firstly, the major high street banks are back lending to householders after years of withdrawing from the market and repairing their balance sheets. |
Mr Beale pointed out that net mortgage lending by the banking sector in the two-and-a-half years to June 2014 was actually negative at minus £1bn. | Mr Beale pointed out that net mortgage lending by the banking sector in the two-and-a-half years to June 2014 was actually negative at minus £1bn. |
In the same period, lending by mutuals (financial institutions owned by their members, also called building societies) was £33bn, of which £19bn was provided by Nationwide itself. | In the same period, lending by mutuals (financial institutions owned by their members, also called building societies) was £33bn, of which £19bn was provided by Nationwide itself. |
"They are now back in the game," Mr Beale said of the high street banks. | "They are now back in the game," Mr Beale said of the high street banks. |
That means that more mortgage products are available, leading to better offers for buyers as greater competition kicks in. | That means that more mortgage products are available, leading to better offers for buyers as greater competition kicks in. |
'Balance' | |
This trend towards greater competition is more than offset by a stronger, opposite trend, which is towards a generally softening housing market. | This trend towards greater competition is more than offset by a stronger, opposite trend, which is towards a generally softening housing market. |
"The market is cooler, there is a general slowing down," Mr Beale told me. "We are moving towards a more balanced situation, there was a lot of commentary about overheating in London and the south-east. Things are now more cautious." | "The market is cooler, there is a general slowing down," Mr Beale told me. "We are moving towards a more balanced situation, there was a lot of commentary about overheating in London and the south-east. Things are now more cautious." |
Data from the Bank of England show that mortgage approvals are down 9% year-on-year and down 20% in the first two months of this year, the Nationwide chief said. | Data from the Bank of England show that mortgage approvals are down 9% year-on-year and down 20% in the first two months of this year, the Nationwide chief said. |
House price inflation is also slowing. | House price inflation is also slowing. |
Fears of an interest rate rise, the looming general election, the possibility of greater economic gloom ahead, tougher rules for mortgage lending and a broad belief that the housing market is over-priced have all reinforced this cooling trend. | Fears of an interest rate rise, the looming general election, the possibility of greater economic gloom ahead, tougher rules for mortgage lending and a broad belief that the housing market is over-priced have all reinforced this cooling trend. |
'Lend into retirement' | |
On the knotty issue of mortgages for over-40s, Mr Beale said some lenders were in danger of over-interpreting the new Mortgage Market Review (MMR) rules brought in by the Financial Conduct Authority to tighten lending criteria. | On the knotty issue of mortgages for over-40s, Mr Beale said some lenders were in danger of over-interpreting the new Mortgage Market Review (MMR) rules brought in by the Financial Conduct Authority to tighten lending criteria. |
That has led to some banks refusing to lend to people who will have retired by the time their mortgage reaches full term. | That has led to some banks refusing to lend to people who will have retired by the time their mortgage reaches full term. |
You can read about the problems that is causing here. | You can read about the problems that is causing here. |
Mr Beale said that Nationwide was perfectly happy lending to people up to the age of 75 as long as there was clear evidence that the mortgage could be repaid. | Mr Beale said that Nationwide was perfectly happy lending to people up to the age of 75 as long as there was clear evidence that the mortgage could be repaid. |
"We will lend into retirement," Mr Beale said. "Maybe one or two lenders have interpreted MMR a little too severely. It may need to be refined." | "We will lend into retirement," Mr Beale said. "Maybe one or two lenders have interpreted MMR a little too severely. It may need to be refined." |
Anyone over the age of 40 looking to buy will heave a sigh of relief at that. | Anyone over the age of 40 looking to buy will heave a sigh of relief at that. |
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