Franky on Finance

In a year, mortgages for people buying a home have dived by 46% as Britain’s banks run out of money to lend.  Figures from the British Bankers Association (BBA) showed mortgage approvals for house purchase in March tumbling to its lowest figure since records began in 1997.  This shows the extent to which banks are tightening their belts as they find themselves unable to secure funding for mortgages.  Borrowers needing to remortgage or purchase a home are finding lenders have raised rates to reflect their own higher borrowing costs and increase margins on mortgages.  Many are also demanding higher deposits to protect against house price falls and to raise the quality of their loan books.  The rising cost of securing funding on the money markets has seen the inter bank lending rate Libor rise to 0.9% above the bank rate of 5% - the historical average is 0.13%.  This has substantially pushed up the cost of new tracker rate mortgages, which are heavily influenced by Libor.  The BBA said it expected lending to continue to weaken due to the continuing decline in mortgage approvals.