Current Low Levels of Mortgage Lending Approvals May Be the New Norm
Mortgage approvals took a dive in April to the lowest level seen since records began being kept in 1993. Experts have varied reasons for this decline in mortgage approvals. Some believe it was the fewer business days in the month due to numerous holidays, others blame it on tight lending, and even others blame it on a lack of consumer confidence. Probably all of these reasons had an impact on the declining numbers of mortgage approvals.
Many experts believe the levels of mortgage lending indicate that there is an entire generation that will miss out on home ownership. Some will be totally shut out of ownership due to tight lending criteria while others will choose to forego mortgage debt rather than get into long term financial problems in an economy that has been estimated to take many more years to recover. Instead of moving up the property ladder, homeowners will move from rental to rental putting out money to landlords versus building up financial assets through property ownership.
The lack of home buyers has put demand below the supply of homes on the market for sale. What should be a prime buyer’s market with falling house prices and low interest rates surprisingly has few buyers in the market. House prices are expected to continue to fall for the rest of the year and the interest rate is not expected to rise anytime soon, but still mortgage approvals are likely to stay way below what used to be a healthy norm. Perhaps the current levels of mortgage approvals are the new norm for many years to come.