Mortgage Availability Remains On Shaky Foundations, Leaving Most Of The Market Volatile

In recent months we have witnessed a sharp decline in the rate of mortgage lending

, casting a shadow over the economic recovery. Official figures from the Bank of England indicate that the overall rate of increase is slowing down, which means that the housing market, sustained only by historically low interest rates, may be heading for a slump

The first quarter saw a significant rise in mortgage lending figures, which was promising. But since April 2011, the figures appears to be rather displeasing with lending figures dropping again in the second quarter of this year, meaning that lenders aren't offering quite so much finance to homebuyers.

Various sources have confirmed that the lending figures and property prices are lower than the normal figures for the first quarter of 2011, which just further confirms that the end is still nowhere in sight, even though things are better than they were a few months earlier.

One expert believes that the final quarter of 2010 was a blip rather than an early boom for the housing market. Lending and house sales increased towards the end of 2010 as more first time buyers then normal were looking to get onto the property ladder and this seems to have skewed the figures.

Though this news is tough for an industry that is struggling to stabilise against a harsh economic environment, the results for the consumer are far from certain. If approvals have decreased, owing to a boost in first time buyers, this might not be terrible news for consumers who are carefully entering in the market.

Global Insight has drawn attention to the more general economic problems caused when considering an hike in house prices, showing that such increases are unsustainable in the face of high unemployment, rising underemployment and growth of low earnings. The group states that such factors are greatly damaging to the prospects for house price rises in a market where credit is seriously restricted and high quality remortgage deals are thin on the ground.

In spite of all of this, many are also reiterating that although markets are slow, and growth is sluggish, there are still some extremely good remortgage deals to be had today, with many lenders still offering competitive rates to those in good financial stead.

Those who are most likely to be approved for a new mortgage or a remortgage are those who have a good credit history, solid work backgrounds and income, and a decent sized deposit or sufficient equity in their property to get a lower loan to value mortgage contract.

He also stated that the availability of credit is predicted to increase during this quarter, a factor which should give badly needed support for the housing market. Mr Pannell also cautioned that this support would be crucial to the recovery and would serve mainly to stabilise the housing market rather than commence a boom.

He also stressed that the demand for remortgage deals remains firm, potentially linked to a widespread expectation of high base rates. He also indicated that the level of approvals in the first quarter showed some of the highest figures, particularly in February, in the past 24 months. He added that remortgages are set to be a strong part of the market in the foreseeable future.

by: Howard Ogollegos

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