Hard for Mortgage Hunters

by Mark Johnston

The bank of England has warned it will be even harder to obtain a mortgage in the next 3 months with fears of deterioration in the economic outlook. Experts have warned of a second wave of the credit crisis.

Reports have shown that even lenders expert to find it increasingly harder over the coming months to secure cash on the wholesale market to fund loans.

Director at mortgage broker private finance, Melanie Bien said;” just when it looked as though lending conditions were starting to ease, the bank is warning that we could face a second credit crunch. For those borrowers who are already struggling to secure mortgage finance, this is nothing short of a disaster”.

There has been a lot of talk in recent weeks regarding the decline in the level of lending for mortgages. The British Bankers Association (BBA) has suggested that this decline is mainly caused by the lack of consumer demand.

This however is not always the case; many lenders now have growing fears of borrower’s ability to keep up their monthly mortgage repayments. These fears are some what justified as statistics show those recent factors such as a consecutive rise in unemployment since the beginning of the year, the VAT increase in January and also the deep cuts to public spending have had major effects on most households finances.

The post office mortgages conducted a study which showed that 53% of first time buyers, aged 25-34, were pessimistic about their chances of ever buying a property, more than half of the first time buyers in this particular study believed they would never get on the property ladder as they will not and cannot afford the deposit required by most lenders.

Therefore unsurprisingly research has found that the average age a ‘would be’ first time buyer thought they might be able to buy a home now stands at 35.

Many lenders have upped their mortgage rates over the past week or so in reaction to reports that show a massive mortgage uncertainty and also higher wholesale borrowing costs.

A recent survey of house prices from the Nationwide building society showed house values dropped from 9.8% to 8.7% during the past year. Interest rate setter for the bank of England, Adam Posen said that;” the economy could be at a tipping point”.

With the current economic climate as it is many lenders on a whole adopt a ‘pricing for risk’ policy when setting their criteria and therefore are still rationing their lending.

Borrowers at the moment who are facing difficulties obtaining finance are all the more frustrated as the number of overall mortgage products has increased. Lenders continue to be strict on their lending criteria.

Chief economist at the Royal Institution of Charted Surveyors, Simon Rubinsohn stated that “the likelihood is that the finance for the property market will continue to be in short supply for some time to come”.

Activity in the housing market on whole is set to remain stagnant in 2011 and continue that way for at least a couple of years to come.

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