Finance for mortgages 'still in short supply'

Posted: 10 Jul 2009 11:16:42 GMT

Prospective first-time buyers are still being hampered in their attempts to take out mortgages as lenders look to shield themselves from bad debt, it has been claimed.

While house prices have eased markedly over recent months, a lack of financing for new mortgages has failed to see this translate into a boom in home buying, with a majority of lenders still unwilling to offer high loan-to-value (LTV) products.

Despite the news that Nationwide Building Society has launched a new mortgage package allowing buyers to borrow out more than the value of their new property, the Royal Institution of Chartered Surveyors (Rics) is unconvinced that its rivals will follow suit.

"As far as the housing market is concerned, mortgage finance is still in short supply and is likely to remain so for some time," Brigid O'Leary, a senior economist at Rics explained.

"That is partly due to a limited deposit base for lending. But also, lenders' risk aversion will keep LTV ratios generally low, not withstanding special rates such as the Nationwide's 125 per cent mortgage announced earlier."

At the same time, Barry Naisbitt, chief economist at Abbey, also noted that lower than expected levels of service output could mean that this lack of finance for mortgage lenders is likely to remain the case for some time yet.


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