The main reason for this is the very sudden withdrawal over a month or two of the majority of mortgage products, the sharp tightening of criteria and the fact that £ Libor ( the banks’ main source of marginal funding until now) has been going up even as official interest rates fall. Essentially all UK lending is ARM, though teaser two year initial fixes were the norm. We have our own version of the reset drama in the US because those who kept hopping provider to use two year teasers very suddenly find there is nowhere to hop to next. Chains are collapsing because first time buyers , sub-prime and those who want high loan to value are disappearing form the base of buyer chains . Finally, there has been no over-building of single homes , but there has been of apartment blocks in city centres which are is very serious trouble Mind you the market for multi-million pound flats in London is as strong as ever. All those wheat barons from the prairies !!
The impact of the very sudden constriction on supply of mortgages was this news this morning……….
‘Persimmon, Britain’s biggest housebuilder by market capitalisation, on Thursday said it had suspended construction work on new sites and said it expected a 24 per cent fall in sales revenues this year.’
From http://www.ft.com/cms/s/0/f61aedb6-11cd-11dd-9b49-0000779fd2ac.html
