The recent rise in inflation has caused mortgage lending to drop to its lowest level in nine years. This is a concerning trend for potential homebuyers, as higher interest rates make it more difficult to secure a loan.
The Bank of England recently raised the base rate of interest from 0.75% to 0.85%, the first increase since 2009. This has had a knock-on effect on mortgage rates, with the average two-year fixed rate rising from 2.42% to 2.58%. This means that borrowers will have to pay more for their mortgage, making it harder for them to afford a home.
The situation is made worse by the fact that wages are not keeping up with inflation. This means that even if borrowers can afford the higher interest rates, they may not be able to afford the deposit needed to secure a loan.
The drop in mortgage lending is also having an impact on the wider economy. The housing market is a key driver of economic growth, and a slowdown in lending could lead to a slowdown in house prices. This could have a knock-on effect on other sectors of the economy, such as retail and construction.
The government is taking steps to try and address the issue. They have recently announced measures such as the Help to Buy scheme, which offers government-backed mortgages to first-time buyers. This should help to make it easier for people to get on the property ladder, but it remains to be seen how effective it will be.
In conclusion, mortgage lending has dropped to its lowest level in nine years due to rising inflation and interest rates. This is making it harder for potential homebuyers to secure a loan, and could have a negative impact on the wider economy. The government is taking steps to try and address the issue, but only time will tell if these measures are successful.
Source: Plato Data Intelligence: PlatoAiStream