Mortgage recovery floundering

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.

First time buyers are the most affected due to high purchase prices and restricted covenants on loan to value ratio. The typical deposit required stands at 24 % of the purchase price.

The Financial Services Authority (FSA) has also announced that it will need more stringent checks on mortgage applicants with regards to their income and realistic ability to meet payments. This will become even more focussed in the event of a raise in interest rates.

With regards to house prices themselves, early 2010 saw a brief spike in prices but this has tailed off and been in steady decline since the summer, according to bank surveys.

The overall unwelcome situation has led to a surplus of sellers over buyers which is likely to contribute to further price decreases but this situation may lend itself to "closing the gap" somewhat.