People attempting to get on to the property ladder for the first time are having to stay in rented accommodation for longer due to a combination of lenders reducing the amount of mortgages on offer, stricter lending criteria, and in some cases banks temporarily not taking on any business from first time buyers.
Bank of England data showed that monthly approval rates are down to 73,000 against a previous average of 100,000.
Potential borrowers no longer have access to the 10 percent plus mortgages being offered by banks such as Northern Rock who at one point, prior to its problems, was offering a 125pc mortgage.
The withdrawal of 100 percent mortgages has raised fears that borrowers will go on a ‘credit binge’, using credit cards to make up the difference when buying a property.
Banks are themselves now looking for cash as the credit crunch has made it harder to come by.
Commenting on Bank of England mortgage approval data, Simon Rubinsohn, RICS chief economist said: “Mortgage approvals remained little changed in February at 73,000. This is more than 40 percent down from the highs seen in November 2006 and 25 percent lower than in September last year.
“The likelihood is that the level of activity in the housing market will slip further over the coming months as mortgage lenders either (temporarily) close their doors to new borrowers or lift interest rates.
“Meanwhile data on mortgage equity withdrawal relating to the fourth quarter of last year demonstrates how the softer tone in the property market is feeding through into consumer behaviour more generally. The amount of equity withdrawn in the final three months of 2007 slipped to just £7.3bn.
“This is lowest figure since the first quarter of 2005. Given the latest data from the housing market, this is likely to fall further over the balance of this year giving households less access to finance to supplement their income.”
