The Bank of England has issued a warning regarding the tightening of mortgage lending by banks and building societies. Banks, it seems, are getter tougher on mortgage lending because they fear the consequences of higher unemployment. The Bank fears that this tightening of leanding will inevitably lead to a fall in house prices, with all the attendant problems this creates in the current recessionary environment.
Banks are apparently asking for higher deposits at the same time as lending at lower earnings multiples. They have also targeted people who borrow on an interest only basis. These people, more often than not, do not have an effective repayment vehicle in place. Therefore the balance outstanding remains constant.
House price data from The Nationwide Index, produced by Britain's largest building society indicates that house price rises are indeed slowing down. In the year to September the increase has fallen to 3.1%, giving an average UK house price of £166,757.
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