Lenders Ease up on Mortgage Conditions

The strict conditions imposed on mortgage borrowers when the credit crunch hit are starting to be eased by lenders.  This is according to information provided by the financial information service Moneyfacts, who say that the number of mortgages available that require a 15% deposit has gone up from 189 to 226 in the past month.  This is in comparison to available mortgages that require a 20% deposit, which has gone down from 136 to 117.  However, Moneyfacts admit that 66% of all mortgages still require at least a 25% deposit.

This is a particularly encouraging development for first-time buyers and could be a sign of increased competition between lenders.  For example, Northern Rock, flush with taxpayers money, have recently come back onto the market with some competitive deals.  This slight relaxation in mortgage rationing may also be related to rising house prices increasing lender confidence and compelling them to realign their risk strategies.  However, the Council of Mortgage Lenders (CML) say that the reality is that first-time buyers still need to stump up a deposit of around 25%.

Following the Bank of England announcing that the base rate of interest would stay at 0.5% for at least another month and cuts of up to half a point on trackers and 0.3% on fixed rates by Northern Rock, Nationwide cut fixed rates by up to 0.31% and tracker deals by up to 0.2%.  Not to be outdone, Alliance & Leicester also cut tracker rates by up to 0.4%.  For buyers with small deposits, Northern Rock and Nationwide look like the best bets.  Northern Rock are offering improving rates for loans of 80-85% loan-to-value (LTV), whilst Nationwide offer a 90% mortgage for customers who also take out their FlexAccount current account.

According to the National Association of Estate Agents, five buyers are currently chasing each property that is for sale.  If that is true, it may go some way to explain why house prices are continuing to rise even though the country is technically in a recession.  In October, the increase in demand failed to translate to increased sales with estate agents averaging 7.7 sales each, down from 8.5% in September.  Having said that, it is very much healthier than at the turn of the year when estate agents were averaging just one sale per week.

A report by property group Savills has forecast that there is a 50% chance that prices will fall by 6.6% next year, but will then rise for the three years after that.  It predicts a 2.7% rise in 2011, 5.5% in 2012 and 8% in 2013.  How Savills feels that it can predict that far ahead with any sort of accuracy is anyone’s guess.  Yolande Barnes, head of residential research at Savills, said: “We have probably not seen the last of house price falls in the mainstream markets yet.  The timing may be uncertain but there will almost certainly be peaks and troughs in the next five years.”