Britain's mortgage lenders are continuing to apply the brakes to the housing market, with new data revealing that mortgages remain far harder to get than before the credit crisis. Moneyfacts, the personal finance analyst, said that while the number of new mortgages being offered has risen by two-thirds since the beginning of the year, they are only available to borrowers with large deposits.
Three in five of all the current mortgage deals in the UK require borrowers to have a deposit of at least a quarter of the value of the loan, although that does represent a marginal improvement on the previous funding famine, said Michelle Slade of Moneyfacts. "Many of the best deals are now available for a 25 per cent deposit, having previously only been available for those with a 40 per cent deposit," she said.
Moneyfacts's figures, published yesterday, reveal that the number of mortgage deals on offer has climbed 66 per cent to 2,351, from just 1,414 in January. But 58 per cent need a 25 per cent deposit, while borrowers with only a 10 per cent deposit have a choice of just 8 per cent of all deals available.
"Lenders may offer some mortgages to those people with just a 10 per cent deposit but the reality is that they prefer less risky borrowers with at least 25 per cent to put down," said Melanie Bien, a director at the mortgage broker Private Finance.
"They court these borrowers with lower rates and less stringent credit scoring. Those applying for 90 per cent loan-to-value deals must pay a significant premium on the rate and face tougher credit scoring, which often results in the mortgage application being rejected. For first-time buyers, it is still incredibly difficult to get on the housing ladder."
Andrew Hagger, of the financial comparison site Moneynet.co.uk, said that lenders remained nervous about repeating the lending mistakes of the past. "Competition among mortgage lenders has intensified throughout 2010 but it's no surprise that over half the products on offer still require a minimum 25 per cent stake," he said. "We may technically be out of recession but the economic situation is still fragile and lenders are taking a far more measured approach in their mortgage lending."
The Moneyfacts figures will add to the row over the extent to which the banking sector is holding back the recovery in the UK, with the Chancellor George Osborne adding to the clamour for banks to lend more to businesses. However, the HSBC chief executive Michael Geoghegan yesterday said his bank had increased the amount of cash it lent in the first half of 2010 significantly. It lent £5.1bn to mortgage borrowers during the first six months of the year.
The latest Bank of England figures show that gross mortgage lending in June was £12.9bn, a monthly rise of some £700m. However, the number of loan approvals at 47,643 was lower than the previous month and well below the previous six-month average. The lack of mortgage finance is also one factor in a reversal in the housing market.