ROOF Blog

Research from the National Association of Estate Agents has revealed that nearly one in four people claim they are unable to get a mortgage due to the tighter lending criteria being used by banks and building societies. More than half of those asked believed that they would have more change of getting a mortgage if lenders had relaxed tough restrictions and accepted lower deposits.

The Council of Mortgage Lenders (CML) said lending has started to pick up again after the number of home loans for house buyers rose by 4 per cent in May. In year on year figures this is still 28 per cent lower than a year ago. The CML said that nearly three-quarters of new mortgage are being taken out at fixed rates, the highest proportion since August 2007, and movers typically borrow 67 per cent of the value of the property. First-time buyers still need an average deposit of 25 per cent, and figures indicate that 80 per cent of first-time buyers under the age of 30 were receiving financial help from their parents.

And in further news, the Bank of England has said there were a total of 43,414 mortgages approved in May, up from 43,191 in April, but down on the expected figure of around 46,000. Mortgage landing in May rose by just £324 million, a third of the level in April and a tenth the amount loaned at the same time a year ago. It was the weakest increase since records began in April 1993.

Moves by banks and building societies to tighten up mortgage deals and raise interest rates is hampering borrowers’ ability to re-enter the housing market. Brokers have reported a higher number of mortgage applications being turned down – as many as 30 per cent being rejected against 20 per cent a year ago. In the past three weeks, Woolwich, Lloyds and RBS have withdrawn loans for purchase and not replaced them.

The Bank of England has released figures showing that the number of mortgages approved for house purchases in April rose 8 per cent. Although the number of mortgage approvals was down 21.9 per cent in year on year figures, it was the third month in a row approvals have increased, leading to hopes that activity is picking up. Of the 1,623 mortgage deals on offer, two-thirds still require a deposit of at least 25 per cent and a quarter want 40 per cent.

The British Bankers’ Association has revealed that mortgage lending has slumped to an eight-year low, as the lack of finance available continues to affect the markets. However, the number of mortgage approved for house purchases increased as buyers slowly starting coming back in the market. Loans were up to 27,685 in April compared with 26,670 in March and 18,027 in November, the lowest level since the records began in 1997.

The level of fines levied against individuals for mortgage fraud so far this year has overtaken the number for the whole of 2008. The Financial Services Authority (FSA) said in the last 18 months it had stepped up pressure against fraudulent brokers who operated during the boom, with fines totalling £302,445 in the first quarter of the 2009, and nine order banning individuals and brokers from the mortgage industry being handed out. The most common form of mortgage fraud is inflating the income of the applicant.

Council of Mortgage Lenders (CML) research shows a sharp rise in the number of mortgages in March. Around 31,000 mortgages were granted, up 29 per cent n February, although down 33 per cent compared with year on year figures. CML said that the cost of paying interest on home loans was at its lowest level since 2004, encouraging some 12,500 first-time buyers to take out a mortgage in March – or 40 per cent of all loans – the highest number since April 2005.  Low interest rates and house prices means that interest repayments equal 15.1 per cent of first timers’ income.

Mortgage lenders are starting to relax their requirements to grant a home loan, according to Moneyfacts. Two-thirds of mortgage deals require a deposit of at least 25 per cent, however the total number of mortgage deals has risen by 7 per cent in the past month, and more of these deals need only a 15 or 20 per cent deposit. In the past few months lenders have been offering better interest rates at 70-75 per cent loan to value (LTV), rather than at 60 per cent LTV.

The lack of mortgage finance is widening the wealth gap between rich and poor and creating a more polarised society, research by the National Housing and Planning Advice Unit (NHPAU). The body says that a continuing affordability problem was making children of affluent owners richer still and the poorest even more disadvantaged – the wealthiest 10 per cent of the population has seen home values rise at more than three times the rate of the poorest 10 per cent, and the impact will continue for generations. Other consequences of the lack of housing affordability include poorer health, unemployment and a housing market prone to boom and bust.