This week saw “Project Merlin” put into force, an agreement for the largest UK banks to lend businesses £190bn this year.
There was no mention of more mortgage lending, why not?
Surely if the banks and lending institutions eased their criteria and lent more mortgage money to pent up homebuyers, this would act as a financial injection to many businesses instead of lending them money. Not only would estate agents and solicitors benefit from more proceedable buyers but so would many other associated businesses, such as removals, home furnishing, builders and D.I.Y. stores.
More mortgage lending would also generate more Stamp Duty for the Government and the associated knock on effect of retail sales would generate more V.A.T.
The banks seem to have found a new business model in the last three years, making big profits without lending money and taking risk. Many banks are reporting an increase in profit and a reduction in mortgage lending.
If this trend continues, the number of house transactions completed for this year will reduce again from last year’s figure of around 600,000. In 2007 this figure stood at around 1.2 million.