Mortgage drought will get worse, says report

Caroline Cassidy

An official report from the Bank of England has warned that the mortgage drought looks set to worsen in the coming months - bad news for first-time buyers once again.

For sale sign outside property
For sale sign outside property

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Mortgage lenders across the country have "tightened credit scoring criteria", the report says, and things are likely to get even tougher.

There are currently less than 50,000 mortgages agreed each month where prior to the credit crunch up to 135,000 a month were handed out.

Britain's banks and building societies admitted to Bank of England officials that they were taking a "more cautious approach" to customers like those who had a deposit of less than 25 per cent or were self-employed.

But without any lending going on, the housing market is likely to drop again and the house price outlook isn't bright.

First-time buyers have been unable to obtain an interest-only mortgage since February and Skipton building society now only offers that kind of lending to those with a minimum deposit of 75 per cent.

David Hollingworth, from mortgage broker London & Country, told the Daily Mail: "This is really bad news. It is a step back, making it even harder for people to get a mortgage."

And there are further concerns about changes proposed by the Financial Services Authority, which would set up stiff new rules about how much we can borrow and what type of mortgage is available.

The Council of Mortgage Lenders slammed the proposals, worried that many could become "mortgage prisoners" unable to remortgage their property.

With first-time buyers unable to secure a mortgage and those who are already home-owners set to become "mortgage prisoners", the housing market is certainly looking bleak.

What do you think? Should the lenders do more to encourage buyers and home-owners or are they right to be cautious? Leave your comments below.