Mortgage lending remains low

Many people wishing to buy a new home are still being denied the mortgage finance they need, as lending conditions remain tight.

Figures released by the Bank of England today shows that mortgage borrowing levels remained weak last month.

The volume of mortgages approved for residential property purchases remained almost unchanged from the previous month at 47,474 - the lowest level since February - as the housing market remained stable.

A spokesperson for the Royal Institute of Chartered Surveyors (RICS) commented: "Two key factors are depressing activity levels; firstly, demand is weakening, as indicated by the by the RICS Housing Market Survey. Secondly, there remains a major scarcity of mortgage finance. Indeed, the latest Bank of England Credit Conditions Survey indicates that mortgage availability is not expected to improve during Q4.

"Despite this, the latest RICS data shows that overall, sales expectations remain positive. Surveyors, in part, are anticipating that potential homebuyers could return to the market given the weaker trend in house prices."

Homes prices fell by 0.7% in October, continuing the modest downward trend that began at the start of the summer, according to the Nationwide.

The average home is now worth £164,381 - which is still 1.4% up on the price a year ago. In September the year-on-year difference was 3.1%.

"If the recent trend in house prices were to continue through November and December, the annual rate of house price inflation would drop to between 0% and -1% by the end of 2010. This would compare to a rate of +5.9% at the end of 2009," said Nationwide's chief economist, Martin Gahbauer.

Prospective homebuyers, particularly first-time buyers may be pleased by the recent softening in residential prices, but they are still held back by a lack of mortgage liquidity and the need to raise large deposits.

A report released by the Home Builders Federation yesterday shows revealed that a typical first-time buyer needs a deposit of over £37,000 in order to buy the average starter home costing £155,000.