Tuesday, 16 October 2007
A third of UK mortgage applications are rejected
At last, some sanity appears to be creeping back into the mortgage market. The number of rejected applications has increased sharply. In the last six months, one in three applications have been rejected.
If the mortgage industry were completely rational, all current applications would be rejected. Housing prices are massively inflated. Anyone actually buying a house in the UK, must be objectively speaking, totally mad. In general, it is prudent not to give loans to mad people.
This story, from the Telegraph, had one other shocking statistic. Apparently, there were 1.2 million loan applications. Given that a third were rejected, this means that there were 600,000 people buying a home at the "top of the market". Assuming that there were a further 1.2 million loans given during the six months before that, then there must be something close to 1.8 million people who have bought an overvalued property during the last year.
Third of mortgage applications denied
Almost one in three mortgage applicants have been rejected by lenders in the past six months as the credit crunch takes its toll on home buyers. Banks and building societies are not only increasing the rates they charge home buyers, they are also tightening their lending, as they try to recover lost profits from the fall-out of the turmoil in the financial markets.
In the latest sign that the credit crunch is hitting ordinary consumers and not only City bankers, an estimated 372,000 of the 1.2 million people applying for a mortgage or re-mortgage in the past six months have been rejected.
This is a sharp increase on the estimated 230,000 people – or one in five applicants – that had their requests for a loan turned down in the six months to March, says research by Moneyexpert, a website that compares financial products.