Home loan approvals down by half

According to the Council of Mortgage Lenders (CML), home loan approvals in July are down by about half compared to last year.

In response to thisrapid reduction in lending activity, the CML director general, Michael Coogan, made a rather curious statement:

"Tighter lending criteria have clearly made it more difficult for first-time buyers to enter the market. The stamp duty and shared equity measures announced by the government last week will be helpful to those first-time buyers looking to enter now, but many may be waiting for house prices to stabilise.

“Restoring the flow of funding to the mortgage market is crucial to helping the housing market recovery and we look forward to the findings of the Crosby Review at the end of the month."

So what exactly is he saying? His members in the CML have made it hard for first time buyers to get loans. However, the government is about to sort things out by reducing taxes and providing subsidies to anyone might be thinking of buying a home. Nevertheless, even these "generous measures" might not do the trick because house prices are falling.

His second comment is even more ominious. He says funding to the mortgage market needs to be "restored". In other words, he wants to see a return to the huge flows of bubble-financing that pushed house prices to their current unaffordable levels. He doesn't say who needs to "restore the funding" but gives a strong hint when he says that he is looking forward to the Crosby report, which will be published later this month.

Why is the CML so keen on the the Crosby report? I am going to take a wild guess. This report is going to say that mortgage market needs direct support from the public sector. A "housing market recovery" demands more cheap liquidity from the Bank of England; more tax breaks; and less stringent financial sector regulation. In other words, the CML wants the taxpayer to put a floor under their profitability.

Coogan and his mates in the CML have completely misunderstood what is going on right now. The housing market is recovering; prices are falling nicely; banks are deleveraging and therefore posing lower risks of a financial crisis; and personal sector debt levels will eventually start to come down. This are all good things that need to be encouraged and not hindered by the callous self serving demands for help from the CML.

The CML have not yet taken on board the fact that there is no possibility of reviving the bubble. It has gone; it is all over. The UK economy is in clean up mode, dealing with the consequences of the CML and their collective irresponsibility.