A whopping 68 per cent of mortgage brokers say they have been unable to source a mortgage for clients in the past two months, according to IMLA's latest survey of intermediaries.
The problem is most acute in the South East, with over 70 per cent reporting they were unable to find a loan, and slightly less critical in the Midlands, West and Wales (65 per cent).
The principal reasons for the inability to find a loan are the tightening of lending criteria and the increase in deposits required as LTVs have been cut - both mentioned by 51 per cent of respondents. After that, 23 per cent of intermediaries cited withdrawal of/lack of availability of products as the impediment.
The problem has been encountered across all product types, with remortgages mentioned by 72 per cent of respondents - reflecting the high level of demand for such products. This compares with 54 per cent who were unable to source a loan for a first time buyer and 50 per cent for a sub-prime borrower. Even with standard status borrowers - the category of customer least affected by the mortgage squeeze - 26 per cent of intermediaries had not been able to meet their customers' needs.
Peter Williams, IMLA's executive director, said: "Our survey shows how intermediaries continue to battle to satisfy their customers, but the lack of availability of product is affecting all parts of the market. This shows how essential it is for the Bank of England and the government to work to ease the liquidity crisis in the market. The announcement of the extension of the SLS by the Bank was good news, but we need to see measures that will help the whole market rather than just a sub-set. It is vital that we have a level playing field and that all categories of mortgage provider, including specialist lenders, have access to funding that will help ease the log-jam for brokers and their customers."
Brokers were asked what customers who were unable to obtain a mortgage did as a result. Inevitably, those looking to remortgage mostly remained with their existing lender at SVR, with 83 per cent falling into this category. For first time buyers, a large proportion rented instead of buying - this being the case for 40 per cent of respondents. In fact, a small percentage of customers decided to sell up and rent (15 per cent), while in 14 per cent of cases the customer is facing repossession.
Peter Williams continued: "Many customers are feeling a considerable amount of pain through the lack of availability of mortgage products. Either they are paying more for their existing loan, or they are being kept out of the housing market and renting instead. Not surprisingly, buy-to-let remains fairly buoyant as the private rented sector responds to growing demand from tenants."
"While the proportion of borrowers experiencing serious problems and facing repossession remains thankfully low, this is a growing problem and a direct repercussion of the troubles in the funding markets. It is time for firm action to ease the situation."
SHIP launches consumer checklist on sale and rentback
SHIP (Safe Home Income Plans) has launched a consumer checklist on the Do's and Don'ts of sale and rent back in response to increasing consumer confusion.
Many "Sale and rent back schemes" involve a company buying your home for significantly less than the market value, and then allowing you to continue living in the property, but only by paying full market rent and often with only an assured short hold tenancy agreement. There are no guarantees that you will be able to stay in the property long term.
The launch comes as a result of research conducted by SHIP into the sale and rent back market, which revealed evidence of misleading claims and advertising by some companies, including portraying themselves as equity release.
Andrea Rozario, director general of SHIP, commented on the issue:
"Whilst we acknowledge that there may be some ethical sale and rent back companies, we are concerned about the number of providers who are making misleading claims in their advertising. We have devised this checklist to help consumers and advisers of some of the key risks and implications of these products and also their rights in order to make an informed decision.
"For the avoidance of doubt there is no comparison between regulated equity release schemes, with which consumers have the full protection of the FSA in addition to the safeguards implemented by SHIP, and the non-regulated sale and rent back sector. The two main differences consumers should take note of are:
Security of tenure: all regulated equity release products give policy holders the right to live in their homes for life
No monthly rent: equity release schemes do not require regular payment from policyholders
"However, misleading advertising can often lead consumers to believe that these two types of product are one and the same. We recommend that consumers always take qualified financial advice before making any financial decisions which will ensure they are aware of all of their options."
Date: 8th, October, 2008
Author: Ben Wilkie
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