Mortgage approvals and other lending

[size5]

I have copy and pasted part of an article on the BBC News website.

"The slowdown in the UK mortgage market continued in March, according to figures from the Bank of England.

It said the number of new mortgages approved for house purchases in March fell to a record low of 64,000, down from 72,000 the previous month.

This was the lowest level since current records began in January 1999, and was down 44% on the figure for the same month in 2007.

However, credit card and other lending increased in March from February."

It is not often that a turn of events in my line of work surprises me, but the last line there has left me flummoxed. In a time where many millions are struggling to some extent or other with rising mortgages, food, petrol, utilities etc and where the banks themselves are having to go to the Bank of England and to rights issues, I can honestly say that I never expected credit card lending to show an increase.

Seems barmy to me.

[kallis3]

They are obviously doing what the majority of us have done in the past - burying their heads in the sand and buying stuff now whilst they still can.

I wonder if there will come a time when the IVA market is forced to call a halt? Surely there must come a time when creditors say 'enough is enough'.

[sblack]

I think it just goes to show that more and more people are using credit cards just to live and manage their ever rising monthly outgoings. It is a dangerous ploy and one that does not and cannot work as most of us have found out. But unfortunately some people just don't have a choice, until it is too late.

[kallis3]

Yes, we were the same. I used credit cards to pay credit cards just to keep how deep we were in trouble from my husband. Eventually people will have to accept their problems, and this is why I wonder if the bottom will eventually fall out of the IVA market?

[sblack]

Hi Kallis,
I asked the same question a few weeks ago regarding the IVA market as I thought the same as you, but the answer I got was basically as long as creditors are receiving the best return they can via the IVA then they will be happy to carry on this way.

[kallis3]

Hi sblack,

Lets just hope that there are enough people out there able to manage to keep their finances in the black all the time to keep the banks afloat!

[size5]

The perceived logic seems to be to the contrary, reproduced, again, from elsewhere:

"Mark Onyett of TDX, said that 2008 was likely to be a boom year for IVA’s due to the squeeze in the global credit market causing lenders to turn away customers who previously would have borrowed to pay off current debts. He said that as the number of problem debts ballooned, up to 600,000 people could be forced to become bankrupt or enter into an IVA.

“For the vast majority of people this year, refinancing and remortgaging won’t be available as a solution,” he said. “Their choice will be narrowed to bankruptcy, a debt-management plan or an IVA. You could see a doubling of IVAs.”

Now, it would be inappropriate to comment on that, but it is fairly safe to say that people who in previous times may have used equity to clear debts will now not be in a position to do so. The choice will then boil down to more unsecured borrowings to keep things afloat, or an increase in the use of the various debt solutions. As bankruptcy generally has a lesser return than IVA or DMP then it is also fair to assume that the market for those products may expand greatly.

Ouch.

[MelanieGiles]

Credit card lending is increasing as the cost of living is going up considerably and people are using credit cards to fund increases in their mortgages.

[size5]

Which leads to more problems, whichever way you look at it.

Still ouch.

[angela18]

I'm just so pleased our IVA was accepted and we can step out of this credit crunch!! So glad we faced our problems, I think things are going to get a lot worse before they get better

[buttercup]

What worries me is the amount of betting/gambling advertised on TV. I think further down the road this is going to have huge implications on credit card debt.

Like you Ang feel so relieved we step away from it & pay as we go.

[MoneyAdvice]

I do agree that mortgages are coming down when compared to the previous year and it is not the only indicator of the real estate trend in my opinion.

Canadian Money Blog-http://www.canadian-money-advisor.ca/archives/

[Emily]

The nation is on a credit dripfeed and if cost of living gets tough then some extra money have to be squeezed from somwhere[credit cards] and as a middle England isn't getting richer[inflation,fuel cost etc] and property EQ is plummeting then you don't have a safety net. The banks these days consider 'remortgaging' as a 4 letter word unless it is used to invest.They do not want people to release EQ as they did and then to have high LTV and then later say they can't pay.

What can people do,but to draw from CC. The Banks are curently rejecting 18k of CC applications a day....so the desperation is there. Perhaps when OFT finally wins the Bank charge case and the Bank pays out - an estimated £800 million will be released into the econmy to gyrate it??

The supply of 'endless' credit have suited the banks till NOW! The £50 billion mortgage/glit swap for mortgages also includes creditcard debts that many do not know about.So why would the banks want to add to that. Egg did the right thing to witdraw the 160,000 of its cards outthere.

[size5]

For those of you who are interested in the statistics, you can copy and paste the following link

http://www.creditaction.org.uk/debt-statistics.html

Scary stuff, but there does SEEM to be a slight slowdown in the rate of acceleration of accumulation of debt, last year it was a million pounds more every 4 minutes rather than every 5 minutes.