A quarter of homeowners cannot get a mortgage

Published 09th Jul 2009

Tighter lending conditions exclude one-in-four borrowers from the housing market, according to estate agents


Nearly one-in-four borrowers believe they are unable to secure a mortgage because of stricter lending criteria imposed by banks and building societies, a survey has found.

The National Association of Estate Agents released figures today showing that 22.5 per cent of homeowners said they could not secure a new deal for a home loan.

It reported that more than half of respondents believed that they would have more chance of getting a mortgage if lenders relaxed tough restrictions on new applications and accepted lower deposits.

About 58 per cent of the 1,800 individuals surveyed said that improving the availability of mortgages was crucial to stop the collapse in property prices.

Peter Bolton King, chief executive of the NAEA, warned that banks risked stifling the market’s recovery and that the Government should pressure them into lending.

He said: “We cannot let the banks convince us that shutting up shop when it comes to mortgage lending is a responsible move.

“The decision to restrict mortgages so severely is rooted in self interest. The Government must do more to put pressure on those banks that are refusing to lend, while highlighting those banks that are easing restrictions to help get the economy moving again.”

However, another survey, released yesterday, suggested some confusion amongst homeowners about the tightening of lending criteria in the wake of the credit crunch.

Unbiased.co.uk, the advice website, found that a third of homeowners assumed lending conditions were far tighter than in reality. It said that individuals believed that banks and building societies would cap new mortgage lending at 2.5 times income. Some lenders are still willing to lend up to 4 times income.

David Elms, chief executive of Unbiased.co.uk, said: "There is a lot of consumer confusion out there. It is not surprising that many potential homeowners have taken a pessimistic view of lending criteria and what income multiples are available to them."

The mortgage drought has shown no sign of easing after figures released showing that the number of mortgages available to new borrowers has crashed to an all-time low. Moneysupermarket.com, the comparison site, said that just 2,282 deals were listed yesterday, compared to 27,962 two years ago at the height of the housing boom.

High street banks that have taken billions of pounds from the taxpayer are charging the highest mortgage rates on the market as the total number of deals available sinks to the lowest on record.

Lloyds Banking Group, which has taken £11.5 billion from the UK Government, requires customers to pay an eye-watering interest rate of 7.89 per cent for a five-year fixed-rate mortgage. The deal is available to borrowers with only a 10 per cent deposit, with a fee of £99.

Buyers who turn to Royal Bank of Scotland, which was rescued and part-nationalised at a cost of £27 billion in taxpayer cash, are charged 7.25 per cent for a similar deal.

Mortgages offered by the two banks are considerably more expensive than those from banks and building societies that have never been forced to go cap in hand to the taxpayer.

New figures from the Halifax released today show that the slump in housing prices could be easing after house prices fell by 0.5 per cent in June. In the three months to the end of June, house prices declined by 1.9 per cent, the smallest quarterly fall since the first three months of 2008.

Source: ' Times '

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