You might think it is getting easier to get a mortgage in Britain. After all, there are more 90% and 95% mortgages on the market than there have been for many years; tracker and shorter-term fixed rates are still knocking around record lows (1.99% at First Direct); and lenders appear to be tripping over themselves to advertise their top deals to desperate first-time buyers.
But look at the numbers on lending and you’ll see something odd. Despite all these great-sounding deals, not very many mortgages are actually being given to anyone. Levels of unsold stock are rising across the country (from 13 months’ worth of sales in April to 14.6 in May) and mortgage approvals are still coming in at around 45,000 a month. Back at the peak of the bubble that number was usually well over 100,000 a month.
At the same time the mortgages that are being given out don’t always come with the same terms as the ones you see on the billboards. Instead, says Paul Diggle of Capital Economics, they tend to come out rather higher. That suggests lenders are “restricting the number of such loans they actually make, perhaps by setting the credit-scoring criteria on these products at a very high level”.
Research this week from L&G showed that 55% of those looking to remortgage in the next two months fear they will have trouble finding a new deal. They’re right to worry. All the signs are that they will have problems. But amid all the worry about the failure of our mega banks to lend us all the money we want, there are interesting signs that there might be an alternative. Banks do a lot of complicated things these days but their traditional – and core – role is pretty simple. They are money middlemen: they connect people with cash to people who need cash, and they take a cut along the way. Simple stuff. So simple in fact that you don’t necessarily need to be a bank to do it. Instead, you could just be an online lending portal.
We’ve written here about Zopa, Britain’s first online peer-to-peer lending operation, several times. But the idea that you can go online and lend your money to strangers for an excellent rate (for you and him) without going anywhere near a bank is no longer a new idea. Zopa now controls 2% of the UK personal loan market and has been joined by other firms, including Ratesetter.com, which launched late last year but has matched over £4m-worth of cash so far.
A new market in business lending has appeared too. Go to FundingCircle or Thincats.com and you can lend directly, not just to individuals but to businesses too (see Why won’t banks lend?). A few weeks ago we wondered here if we really needed central banks. Now, while it’s still early days for peer-to-peer lending, we are beginning to wonder if we mightn’t be able to do without most banks altogether.