Research shows "confusion" over mortgages

08/07/2009

Mortgage market conditions are better than some doom-and-gloom reports have suggested, a financial website claimed yesterday.

Unbiased.co.uk released research showing that customers are now finding it easier to secure credit than they did during the worst of the financial crisis.

According to the data, the majority of lenders are offering loans worth around four times the borrowers annual income.

However, perceptions among the public suggest that the conditions are much bleaker, with 33 per cent believing they can only get between 0.5 and 2.5 times their salary.

This in turn indicates that negative news about the credit crunch and economic downturn are making people believe that conditions are worse than they actually are.

However, the effects of the financial crisis have been shown by other reports to have severely negatively affected the market.

For example, the Council of Mortgage Lenders expects annual repossessions numbers to rise from 40,000 in 2008 to 65,000 in 2009.

David Elms, chief executive of Unbiased.co.uk, said: "The mortgage market has been going through tremendous change over the past year and lending criteria certainly isn't what it used to be. There is a lot of consumer confusion out there.

"It is not surprising that many potential homeowners have taken a pessimistic view of lending criteria and what income multiples are available to them."

Offering his own analysis of the Unbiased.co.uk figures, EuroDebt director Kevin Still added: "The factors affecting public perception are based upon personal experience. Whilst there may be reasonable mortgage products on offer with over three times salary multiples, the criteria with regard to loan-to-value, creditworthiness and set-up fees may make some of these inaccessible to many potential borrowers. The public and small businesses are also still seeing banks calling in some credit facilities or trying to trade out of higher risk clients.

"With consumer confidence still low and job security fears still being high on the agenda it is no wonder that new applications are low. According to the FSA, the number of mortgages in arrears continued to rise on all measures, amounting to over 377,000 secured loans. Indeed, MoneyExpert.com estimated that over 902,000 cash-strapped homeowners have missed a mortgage payment deadline in the past six months. It is also estimated that 5 million households will be in negative equity by the end of 2009. I suspect these are fairly compelling reasons for sitting tight."

Tags; Housing Debt and Bills, Young Family Finances,

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