Mortgages Uncovered

There was a continued slump in mortgage lending during February, gross lending plummeted to 60% on February 2007 were recent figures released by the Council of Mortgage Lenders (CML) has said.

The CML said

“members’ ability to lend was drying up because too many savers were choosing to put their money in National Savings policies.”

This has lead the market to mortgage rationing which has slipped house prices by more than half in some place.

“Retail savings are now the predominant source of funding for mortgages,” said Michael Coogan, the CML’s director general. But banks and building societies have seen savings ebb away to National Savings & Investments, which has a negative impact on their ability to lend. Until funding improves, the capacity of lenders to lend will remain constrained,” he warned.

NS&I has raised another £10 billion in the first 9 months of this current financial year which is way ahead of its first forecast of an extra £4 billion for the entire year.

£6 billion came in the last 3 months of 2008 during the collapse of B & B and whilst Icelandic banks were pushing savers into a completely safe home for their money.

NS&I brought down savings rates with the Bank of England’s bank rate.

This week NS&I announced

“the payout rate on Premium Bonds will be cut from 1.8% to 1%, with one of our two £1m jackpot prizes being cancelled.”