UK housing wobbles as credit drains away

[questionmark]

UK housing wobbles as credit drains away: James Saft

Fri Nov 23, 2007 1:43pm EST

By James Saft

LONDON (Reuters) - Getting a loan to buy a house in Britain, especially as an investment, is now a lot harder, spelling trouble for not just its extremely pricey real estate, but for its economy and financial markets as well.

Figures released on Friday by the British Bankers Association showed October mortgage approvals fell to a record low, down 37 percent from a year ago and 18 percent from only a month before.

Several high profile lenders have cut back on riskier loans, particularly those to "buy-to-let" landlords, who use borrowed money to fund the vast majority of their purchases of property and who account for about 12 percent of mortgage lending.

The cause? The same one that brought down Northern Rock (NRK.L: Quote, Profile, Research), namely that after the subprime debacle investors no longer have much of an appetite for securities backed by mortgage loans, no matter how high the rating or simple the structure.

In 2006, 345 billion pounds ($709 billion) of house loans were made in Britain, according to the Council of Mortgage Lenders. Lehman Brothers puts the total that ended up in securitizations at 137 billion, making that market the source of nearly 40 percent of last year's credit.

But since the beginning of August, only about 7 billion pounds of mortgages have been securitized, according to Unicredit data, marking a spectacular decline.

"If lending dries up, the longer it lasts the greater the risk that you see a sharp correction (in housing prices)," said Howard Archer, an economist at Global Insight in London.

"A lot of people are only just beginning to twig that this could go on longer than was thought only a few weeks ago."

Full stroy, Source: Reuters

[Lotus Flower]

I am wondering if it is drying up a bit because the housing in UK is so damned expensive that it is getting nigh on impossible for first-time buyers to get the feet on the first rung of the ladder. In fact couples need bloody well-paid jobs just to be able to qualify for a mortgage in the first place, that is if they can even save up enough for a deposit before they reach retirement age.