Homebuilders bemoan mortgage constraints

9th Jul 2009 11:21

Homebuilders Barratt and Redrow have said that the lack of mortgage availability is stunting the recovery of the housing market.But the Council of Mortgage Lenders (CML) said today there are signs that lenders may relax their criteria in the coming months. In the last year, banks have drastically curbed back on mortgage lending due to a shortage of funds because of the banking crises. Barratt said in the last six months it has seen signs of stability in the new housing market but said mortgage finance remains "highly constrained.""We are not...going to see a sustained improvement in trading conditions until the availability of mortgage finance, particularly in the higher loan to value segment, recovers," it said. Redrow said: "Although recently there has been some easing of the situation, the most significant concern to the industry remains the chronic shortage of mortgage supply exacerbated by the widespread practice of down valuations by surveyors representing mortgage lenders." "Without doubt this is a major obstacle to the recovery of the housing market and we are of the view that resolving this issue can play a significant role in a recovery of the economy as a whole," it added. Both firms saw selling prices fall in the year to June. Redrow's sale price fell to around. £137,500 (2008: £156,900) while Barratt's dipped to around £157,000 (2008: £183,100).The CML said home loans granted in May rose 4% and that 80% of first time buyers are receiving help from their parents for deposits. But the group pointed to signs that lending criteria may be becoming less stringent. Since reaching a record 25% in February, the average first-time buyer deposit has remained unchanged. And a typical first-time buyer income multiple has held at 2.97 from April.Home movers typically borrowed 67% of the value of the property in May, unchanged from April, and borrowed 2.68 times their income, up from 2.63 in April."We might expect to see a modest easing in these measures over the summer, as some higher loan-to-value products came on to the market in recent months and lenders reported that they intend to increase lending at higher loan-to-value ratios in the Bank of England's recent Credit Conditions Survey," said the CML.