Shortage of Mortgage Funds

In the UK it is becoming increasingly difficult to obtain mortgages. First Direct suspended new mortgages recently as have Halifax. The number of available mortgages has been reduced by nearly 40% this week. This is because of the credit crunch and the non-availibility of funds on the wholesale interbank market. This has forced the rise in the cost of this money which is being passed on to the consumer. First Direct claim that they have suspended their new mortgages because they cannot cope with the demand and need to suspend issuing new loans to be able to deal with the backlog. In the UK part of the demand arises from lenders coming off discounted fixed products and looking for cheap alternatives. These are becoming less and less available. However the problem is not only for people refinancing but also for purchasers. According to the Financial Times one third of housing deals are falling through because of the non-availibility of funds..

In Ireland while house prices are still falling the rate of the reduction is less than what it was. The fall was 1.2% in November, 1.4% in December, .8% in January and .7% in February. However if mortgages become as unavailable as they are in the UK and if the cost of lending rises this will obviously add to the problems with the housing market and can only lead to a more rapid rate of decrease in the cost of property.

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