Gráinne Gilmore and Rebecca O’Connor
But despite promises from banks that they will loosen their lending criteria in the Bank of England’s recent Credit Conditions survey, analysts warned that the situation is unlikely to improve significantly.
Paul Samter, the CML economist, said: “Overall access to mortgage finance will still be constrained by the diminished number of active lenders and the shortage of funding available to them.”
Only weeks ago Lloyds TSB, the part-nationalised bank, launched a mortgage deal aimed at struggling first-time buyers, allowing them to borrow 95 per cent of a property’s value as long as their parents or family save the equivalent of 20 per cent of the loan with the bank. Other banks are expected to follow suit.
Mr Samter said: “The Bank of Mum and Dad remains an apparently important source of help for young first-time buyers. Some products specifically reflect this fact and we may begin to see more products that echo this phenomenon.”
There was a further blow for borrowers as separate figures showed that rates for fixed-rate mortgage deals rose to a six-month high in June, despite the Bank of England base rate remaining unchanged at 0.5 per cent. The average rate on a two-year fixed-rate deal for borrowers with a 25 per cent deposit rose to 4.47 per cent, up from 3.96 per cent in May, figures from the Bank showed, pushing up the repayments on a £150,000 mortgage by £513 a year. But there was a glimmer of hope for home sellers as the CML said that activity in the housing market continued to pick up in May. The number of loans granted to first-time buyers, crucial to the health of the housing market, rose for the fourth consecutive month to 14,000. The overall number of home loans granted for house purchase also rose by 1,400, to 37,400, although this was down from 51,800 last year.
Some of the UK’s biggest housebuilders highlighted signs of improvement in the housing market in trading updates yesterday, after an increase in sales and price stabilisation in the past six months.
Barratt, Redrow and Galliford Try all indicated better trading conditions in the first half of 2009 compared with the second half of 2008, but said that a chronic shortage of mortgages and the practice of down-valuations, where mortgage lenders value a property lower than the agreed purchase price and reduce the amount they are prepared to offer, would continue to hold back recovery. http://business.timesonline.co.uk/tol/business/article6677088.ece
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