Government credit controls may impact mortgage market

| August 31, 2010 | 0 Comments

The recovery of the UK housing market could be under threat with reports that the Bank of England may restrict mortgage lending.

The Bank’s deputy governor, Charlie Bean, has apparently indicated that new measures aimed at stabilising the economy could set deposit levels for UK mortgage borrowers at between 10% and 25%.

The deputy governor has reportedly spoken about the possibility of credit controls in the housing market over the weekend, while attending a meeting with other central bankers.

With the supply of new homes for sale continuing to outstrip buyer demand a healthy uptake by first-time buyers is essential in preventing a return to falling house prices.

However, lenders’ demands for large deposits are already a problem for those getting a foot on the property ladder, having helped to force first-time buyer numbers down to 94,600 in the first six months of 2010, just half the number for the same period of 2007, according to Halifax.

Research by Moneyfacts Group for the BBC recently revealed that while the number of mortgage products available has risen 66% so far this year (to 2,351) 58% of deals demand a deposit of at least 25% and only 8% invite applications from those with 10% to put down.

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