Mortgage availability continuing to fall

Credit conditions in the UK are worse than ever but a recent survey by the Bank of England indicates that lenders are likely to put a further squeeze on availability of home loans in the short to medium term.

Lenders advised that the chronic shortage of liquidity in wholesale funding was the reason for the reduction in credit availability.

Lenders also expect the number of people who default on their mortgages to rise over the coming months.

The severe lack of funding will only improve with some serious concerted action.

The Bank of England's special liquidity scheme seems to be having little effect as neither the cost or availability of wholesale funds has improved for lenders since its launch. Therefore the outlook for customers has not improved.

These funding issues are still the root of the problem of falling demand for house purchases and the rapid decline of major house builders in the UK. These effects are going to be extremely long lasting if the government does not take further action soon.

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