Get to grips with debt to cut lending cost, says AMI
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The Association of Mortgage Intermediaries has warned that the budget deficit is driving up the cost of lending and is demanding that the incoming Government puts in place “real” debt reduction plans.
AMI’s latest quarterly economic bulletin, which looks at the economy, housing and mortgage markets, says gross mortgage lending will be around £150bn for 2010, slightly ahead of the £143bn managed in 2009 but still far below the £363m peak reached in 2007. It predicts that net lending in 2010 will be around £20bn.
Director Robert Sinclair says: “The cost of funding the current levels of borrowing will be a continual drain on the economy, driving up the cost of lending between banks.
“This continues to make new mortgages look less attractive than the current default rates many consumers are enjoying after their fixed-term deals end.
“However, this equilibrium in mortgage markets will only last while base rates stay very low. In the medium term, a bout of inflation might start to look attractive to politicians if it becomes impossible to control the deficit and bring down the national debt through higher taxes and lower spending.
“It would represent a painful transfer of wealth from savers to borrowers, reducing the value of debts relative to earnings but eroding the value of savings in the process.”
Sinclair says it must be of concern to the Treasury that house-price inflation is app-roaching double digits but latest trends show it slowing.
He says remortgage levels remain low and calls on the Government to work harder to get lenders lending again if we are to see an improvement in the mortgage market throughout 2010.
He adds: “There is a distinct need to ensure that the intermediary sector continues to be supported in order to provide customers with the full range of advice and help to review all the options available to them.”
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