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UK Mortgages Loan Hits Its Lowest Since 2011


While the United States and other countries are concerned about the impending increase in mortgage loans and rental fees, it seems London is experiencing quite the opposite. In fact, reports revealed that most of London’s sellers are offering discount prices to their real estate and mortgage up to 10%. Too good to be true? Well, you better start believing because the loan mortgages and lending in the United Kingdom hit its lowest point since January 2011.

The Mortgages and Lending in the United Kingdom Dropped for the Past Three Quarters Since the Year 2017

Bank of England Suffers Decline in Mortgage Loan Performance Since 2011

Bank of England Suffers Decline in Mortgage Loan Performance Since 2011

The Mortgage lending purchase of United Kingdom had dropped since December as the preference and appetite of the real estate buyers changed drastically because of the expensive pricing of London’s real estate properties. The Bank of England revealed that it only closed around 46,475 mortgages loans around January this year, that’s about 6% down compared to the data in January 2015, where the bank had closed and processed around 61,039 mortgages. Not only that, but it has been the weakest performance of real estate mortgages for the past 8 years, since January 2011. This low key performance figure prompted the London sellers to lower down their real estate mortgage and offer as high as 10% discount rate in an attempt to boost its sales.

Archer Explained the Decline in Real Estate Mortgages Performance since December 2017

Archer Explained the Decline in Real Estate Mortgages Performance since December 2017

Aside from London, the decline of pricing and sales of mortgages and real estates were also reported in other major cities like Aberdeen, Cambridge, and Oxford, based on the Hometrack Cities Index. The rest of the United Kingdom though was enjoying a steady real estate mortgages growth. The chief economic adviser of EY Item club, Howard Archer, explained that the drop of performance sales in December last year was due to the pressure of the inflation in disposable income as well as the Brexit uncertainty. Not to mention that the Bank of England also increased their interest rates in early November 2017.

The Bank of England Governor Also Gives His Insight about the Recent Mortgage Decline  

Mark Carney, the Bank’s governor stated that the disposable incomes will continue to rise at the second half of the year 2018 as they anticipated that the inflation will fall back to 2%, followed by the annual wages growth of the labor workforce. If the proposal to increase the wages’ growth up to 2.4%, then Mark is hoping that the real estate loans will recover from its downall from the beginning of the year.

Mark Explained that People Shouldn't Worry About the Fall of Real Estate Mortgages this Year

Mark Explained that People Shouldn’t Worry About the Fall of Real Estate Mortgages in the year 2018

On the other hand, the Financial Conduct Authority reiterates that real estate brokers should also rethink their strategy in selling properties and processing interest-only mortgages type of loans. It’s because the high interest rate would make the homeowners and customers unable to pay their capital as well as their interest during the tenure of contract, which may endanger such homeowners in losing their house or any kind of real estate property. The FCA stated that the interest-only market is doomed to fail sooner or later. In fact, it just works right now like a ticking bomb following the financial crisis from 2009, which was worsened by the impending Brexit.

The Data Also Shows that House Loans With Interest-Only Mortgages Came from Low Income Earners

Another factor that contributes to the decline of the mortgage sale is the fact that most of the customers who acquire interest-only mortgage loans or home loans came from the lower-income earners. In fact, about 26% of its customers, or equivalent to 1.67 million people, are acquiring home loans, with only around 17.6% of them are able to pay the full capital and interest with outstanding record. Furthermore, the low-income earners are relying heavily on credit card loans in order to pay their home loans or even to meet the end of their living. In which, it exacerbates their problem in debt and being unable to pay the high interest rates that keeps on accumulating each month.

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