general perception that everyone is rejected by lenders so there is little point in applying. Research from the Council of Mortgage


Lenders suggests this is a trend. Only 42% of 18-24 year olds expect to be home owners in two years’ time and the number of households that are renting privately has risen from 10% ten years ago to 17% today. Mark Graves, financial services director


at LSL Property Services, says the way consumers feel about negotiating the mortgage maze has not been given due consideration. “Borrowers are totally confused as to


whether they are a good client or not,” he says. “The feeling of being rejected for a loan has been completely underplayed by lenders. “No-one has really acknowledged the


impact on people’s confidence and their future attitude towards moving based on the memory and stress associated with being declined. It is not inertia keeping them away it is the fear of further rejection.” Nigel Stockton, financial services


director at national broker Countrywide, says the lack of consumer confidence in the mortgage market is the industry’s fault. “This year the whole industry, including


all lenders and brokers, have failed to get the message across to the public that it is possible to get a mortgage, in fact pretty competitively priced mortgages at up to 90% LTV,” he says. “The considerable level of negative


media coverage over the last three years around the challenges faced by the first-time buyer, particularly in relation to the level of deposit required is significantly influencing the mindset of the consumer.” The CML reports that the average


first-time buyer loan is now £102,750 with an average LTV of 80% which would equate to a required deposit in excess of £25k. Stockton believes this is “simply a bridge too far” for many first-time buyers. “We have to get the message out there


that we are open for business at 90% now and buyers should come and see what is available,” he says. Nick Harrison, head of personal lending


at Clydesdale bank also believes borrowers simply not knowing about possible routes through the maze is the bigger problem. “Deposit is part of it but the other part is


not being aware of the range of products that are actually available because it’s smaller, regional lenders that are innovating and offering some of the best deals,” he says. Kensington’s Alex Hammond says while


it is true that lenders have tightened their criteria since the banking crisis, the current perception of mortgage availability is in danger of creating a generation of mortgage prisoners who consider themselves trapped in rental accommodation without fully assessing the options available to them.


remortgages This attitude seems to be reflected in the low levels of remortgage activity. Although this part of the market picked up slightly in May with 29,000 remortgage loans worth £3.6bn being advanced compared to 24,700 loans worth £3bn in April, remortgaging is still historically low. Compared to May last year, remortgage


lending has increased by 9% in value, but remains below the recent peak in March of £4.1bn. Industry experts put this down to the


extraordinary interest rate environment we still find ourselves in. With the Bank of England having held base rate at 0.5% for more than two years, borrowers are opting to sit tight on lenders’ standard variable rates. Indeed the CML reported that the


average SVR for 2010 was 3.96% compared to the average for the first six months of 2011 which was 4.01%. The average SVR has decreased by


nearly 3% since September 2008 while the difference between SVR and Bank base rate in September 2008 was 1.95% compared to 3.5% in June 2011. The number of people coming off fixed


rates and reverting to SVR is still rising and best estimates from across the industry put the proportion of people sitting on these rates anywhere between 30% and 50% of existing mortgages. 


mortgage introducer AUGUST 2011 29


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