Home mortgages to decline

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Home mortgages to decline

Home mortgage lending in Britain looks set to decline by around ten per cent between now and 2008, a leading independent market analyst has predicted..

Datamonitor believes that a fall in the housing market and house prices will cause such a decline.

Consequently, Datamonitor believes that the next few years will be a hard battle for mortgage lenders.

Voicing Datamonitor's fears, a financial services analyst at the company said: "Lenders will need to devise cost effective strategies in the light of increasingly wafer thin margins and inject a more innovative approach in order to secure a share of the market."

In the last quarter of 2004 mortgage lending declined by 15 per cent in comparison with the same period in 2003, making the housing market's performance throughout this period far less impressive than in the previous nine months.

If the 10 per cent drop becomes a reality, the fall in lending will see total lending drop from £292 billion a year to around £264 billion by 2007.

Mortgage lenders must therefore concentrate on retention to prevent serial remortgagers from continuing to erode their margins, says Datamonitor.

Ed Ripley from Datamonitor said: "Mortgage churn will remain predominant given lenders willingness to compete aggressively on price."

However, he went on to say: "some lenders will turn their backs on short term price-led acquisition strategies and serial remortgagers and develop selective acquisition processes to prevent future churn."

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