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Written by rosalind renshaw



Brian Murphy, head of lending at independent mortgage broker Mortgage Advice Bureau, writes:


The Bank of England has just released the latest mortgage lending figures for August, and any hope that the mini housing market recovery experienced over the last quarter might continue, appears to have been short-lived. The problem still remains one of availability – the buyers are there, the mortgage finance is not.

You only have to look at the figures to see why the market has ground to a halt.

In 2007, the gross mortgage market was £365bn. In 2008, that figure had reduced to £260bn and this year the forecast is £145bn, which represents a 60% fall in gross mortgage lending in two years.

The scale of the problem is brought into even sharper focus when you consider the volume and variety of mortgage products currently available. At the beginning of 2008, one of the major sourcing systems, Trigold, used by many advisers to identify suitable deals for their customers, had in excess of 40,000 mortgage products available within its database. By the start of 2009 that same system had 3,000 available products – just 7.5% of the product numbers available to source twelve months earlier.

The situation has not improved, with product numbers continuing to decline steadily, particularly in the first half of the year. Numbers do now appear to be stabilising around the 2,000 mark, but the thankless task of the intermediary to find clients a mortgage deal is no better illustrated than by this dramatic fall in product numbers.

Also, spare a sympathetic thought for first-time buyers, looking to secure higher LTV loans. Lenders are simply not engaging in this sector at all at the moment, evident from the fact that intermediaries currently have access to around 30 deals at 90% LTV.

This lack of supply also dictates the significant margin that lenders, who are actually offering deals, are able to charge, with rates at the 90% LTV levels in the high 6% or low 7% range. Conversely, a borrower who only requires 75% LTV can access products at around 4%. This is a complete turnaround from where the market has been historically, when even two years ago it was often first-time buyers who had access to the best priced products, together with features and incentives attached to the deals to attract buyer interest.

With lenders having finite levels of funding and with the much tougher capital requirements now required of lenders when lending at higher loan to values, the market will take some time for appetite and any degree of competition to return to the higher LTV sector.

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