A further decline in demand for mortgages is expected, in the coming months, as the housing and mortgage market continues to malinger.
Major lenders are speculating that house prices will fall in the first quarter of 2011 as buyers and sellers delay the decision to move.
This has been reported in the Bank of England's Credit Conditions Survey and lenders anticipate that this will also have a knock on effect for remortgages.
However, the lending picture remained relatively unchanged throughout late 2010 but with falling prices the availability of mortgages could pick up.
Approvals for home loans, especially remortgages, have shown a slight increase in the November period of 2010, according to the Bank of England (B of E)figures.
The number of mortgages approved showed a marginal rise but remortgages were approved by nearly 4,000 more to 34,262.
However, this rise still stayed below the 6 month average of 48,145 which still indicates subdued lending at the end of 2010.
A key cause for this is the decreased or lack of demand from first time buyers although market data indicates an increase in the availability of loans for those with a 15% deposit.
It's no secret that mortgage lending has declined but market data has shown a shift in trends for first time buyers.
In October 46,000 mortgages were approved which is still down on September, by about 4%, and down on the same month in 2009 by around 16%.
But the same data shows an overall decrease in the size of a deposit required by a first time buyer. September showed that the typical deposit was around 24% but in October this had deflated to 20%.
Building societies, banks and other financial institutes have reported that it is not expected to see any significant recovery in the mortgage market next year.
A new screening or vetting process may solidify the current restricted lending that is already in place, industry professionals have opined. This is somewhat corroborated by the fact that mortgage lending last month stood at £12.4 bn which is the lowest for a decade.
House prices continue to slide in November with property website Rightmove reporting that sellers have cut prices by 3.2%, resulting in "the biggest monthly drop since December 2007". As Government spending cuts and tax rises become imminent, the future housing market looks bleak as many sellers adopt a 'wait and see approach'.
Mortgage lending in the UK fell to £12 billion in September which is the lowest September figure since back in 2000. It is also a 1% reduction from the August figure and a 7% reduction on the same period in 2009, which again illustrates the difficult situation for the UK mortgage market, UK property market and UK homebuyers.
The US banking sector has today fallen on concerns that companies such as Bank of America may be forced to buy back mortgages which were the subject of recent foreclosures. As we mentioned in one of our earlier articles, the US authorities have launched an investigation into the foreclosures market amid concerns that legal procedures and property documents were not reviewed correctly and some foreclosures may well turn out to be illegal.
Tesco, the leading UK supermarket group, has confirmed plans to enter the UK mortgage market in the first quarter of 2011 have now been delayed until the summer of 2011. It seems that a number of regulatory issues and the company's inability to put together a transparent and user-friendly mortgage operation have forced the slight delay. The company is adamant that the new service will be more transparent than anything on the market at the moment and more user-friendly. If this is the case, then a wait of just a few months may well be worth the wait for UK house buyers?
Despite the fact that the credit crunch began in the US, and appears wholly to have occurred as a consequence of high-risk US mortgage lending, there is no doubt that the UK mortgage industry played more than a passing role in the collapse of the UK property sector. While the FSA (Financial Services Authority) is being accused of "throwing out the baby with the bathwater" there is no doubt that element such as buy to let mortgages and self certified mortgages played a major role in the collapse of the UK property sector.
The Financial Services Authority (FSA) seems determined to push through major changes in the UK mortgage industry which would reduce the perceived risk for mortgage lenders. However, despite the fact that the majority of interest only mortgage holders have had no problem covering their monthly interest payments and final capital repayments it seems that the FSA is determined to stamp out interest only mortgages in the future. So will this really happen?
