“When looking at the lending arena you can’t get away from the influence and problems emanating from the Eurozone.
“With the troubled Spanish economy just receiving a bail-out the UK mortgage market, quite rightly, continues to keep focused on any potential tremors emanating from this marketplace.
“Of course as I write this even more news will no doubt continue to flood the market and the exact depth and extent of this crisis currently remains somewhat uncertain.
“The complexities involved from so many sources and connecting economies make it almost impossible to predict precisely what will happen at any given time but what is certain is that this issue is at the forefront of all governments around the world as they battle to suppress any lingering damage to the world economy.
“Looking at the European lending arena in more detail new research suggests that almost half of European lenders expect to see a drop in lending in 2012. This comes via research from Efma-CRIF when it quizzed lenders about the possible impacts of the European commission’s proposal for a directive on credit agreements relating to residential property.
“The survey found that expectations for 2012 are not encouraging - only 18% of respondents believe they will see an increase in loan volumes compared with 2011, and 41% expect a decrease - only 22% of specialised financial institutions/credit intermediaries expect a reduction, compared to 47% for full service banks.
“In terms of market trends observed in 2011, 51% of those interviewed reported a fall in loan demand and volumes equivalent to that of 2010. The mortgage market situation is seen as particularly difficult, with Basel 3 requirements, shortage of liquidity and the uncertain economic situation increasing fragility.
“The wider European market is a hugely complex one at the best of times and the current problems will certainly not help when trying to boost lending confidence and it will be interesting to see the effect on the UK housing market.
“In fact it has been warned by a think tank that the escalation of the Eurozone crisis will widen the gap between a stronger British housing market in the south and a weaker market in the north.
“The Centre for Economics and Business Research has predicted that while house prices would rise 2% in the South East this year, and 2.4% in London, prices would fall 2.7% in the North East and 2.2% in Scotland.
“Overall it expected prices to rise by 1% in the UK, following a 1.5% fall in 2011.
“The CEBR said renewed tension in the Eurozone in the first quarter had boosted international demand for British property, as wealthy investors sought a safe haven for their money. It said that much of this demand, centered on London and the South East, would help to support prices in those areas.
“The housing market will always be an important component in the economy as a whole and it’s good to see some level of investment being made from overseas as once again Britain is building up its reputation of a safer haven for investment.
“But it’s also fair to say that as a result of the Eurozone issues many within the industry continue to look at the lending area with a certain degree of trepidation fearing that rates are only going to head in one direction and that is up.
“Capital Economics has recently predicted that a departure by Greece from the Eurozone could push mortgage rates up by around 1% with many other industry commentators suggesting some degree of rise being feasible.
“So in many quarters the recent announcements of cuts to fixed rate deals from Barclays, Virgin Money and the Yorkshire Building Society may well have come as a pleasant surprise.
“The truth is that there are still some attractive deals out there and lending is still taking place despite the somewhat disappointing recent Council of Mortgage Lenders figures.
“There was also some ray of light from the Building Societies Association when it revealed that gross mortgage lending by building societies and other mutual lenders rose 23% in April 2012 compared to the same month last year. It added that in the first four months of 2012 lending rose 36% compared to the same period in 2011.
“It’s good for the market that smaller, arguably more flexible lenders with differing lending criteria are remaining active especially when you consider that some of the larger lenders appear to be reining back their levels of lending.
“At Barclays we are continuing to experience a trend where more people are looking to remortgage as a result of the SVR increases experienced in recent times and this is a robust market that we expect to see a continued strong level of activity.
“The first-time buyer market is also one in which we are looking at with increased appetite but unfortunately I can’t give away too much regarding the specifics yet. Suffice to say that we believe that this remains a vastly underserved area which is in dire need of some innovation and increased competition.
“So what to expect in the next month? This is the question. There is no doubt that most lenders are in a far more robust position than recent years to withstand external economic pressure but the extent of this pressure is sure to dictate lending conditions.
“As a result intermediaries need to act fast on behalf of their clients to snap up some good competitive deals now before any further bad news from the Eurozone affects the market.”
