Speaking at the Council of Mortgage Lenders’ annual conference, Mike Culhane, managing director of Oakwood, said its research had also uncovered that an estimated £60 billion of supply had disappeared from the UK market this year alone.
Culhane said: “There were signs pre-August that there were problems, but it was August when it hit and we saw people panicking. We are seeing limited and sporadic trading and liquidity is still very jittery. Around £60 billion of supply has been pulled from the UK market and the speed of drop off has been incredible. Everyone is moving product criteria so quickly and that is what is moving application drop off.”
He added that any further market jitters would extend the time line of recovery from the credit crisis beyond the predicted time of Q3 and Q4 2008 and warned that investors would have to look for lower, steadier capital returns on investments.
Jonathan Cornell, managing director of Hamptons International Mortgages, commented: “It’s a bit difficult to know how bad the funding gap is going to be. Most brokers would say there is an oversupply of lenders at the moment fighting over the same business, which has brought pricing down to silly levels. With the disappearance of some of the specialist sector funding, pricing will go up and that makes it more attractive for balance sheet lenders. The more pricing goes up, the more likely the funding gap will fix itself. It’s great news for balance sheet lenders and those with low cost models.”
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