Despite receiving millions of pounds worth of bail-outs, lenders are still being cautious when it comes to offering mortgages to first time buyers.

Just 10 lenders are currently offering 90 per cent loans to value, in comparison with 41 lenders offering 95 per cent loans last year.

Due to the current economic downturn, many lenders have tightened their criteria for offering a mortgage. This means that first time buyers must raise a bigger deposit on a house. According to statistics from the Council of Mortgage Lenders (CML), 40,000 home loans were approved in October last year - less than half the number approved during October 2007.

This wariness to lend, coupled with high rates of between 4.99 and 6.64 per cent, is pricing many out of the market. According to Francis Ghiloni of mform.co.uk, the mortgage website which conducted the survey, strict criteria for borrowing mean that potential buyers are put off getting onto the property ladder even though house prices are falling rapidly. “Conditions are almost perfect for first-time buyers but lenders are not lending,” he said.

However, Sue Anderson, head of member and external relations at the CML, has said saving to put down a larger deposit is “no bad thing” in the current climate, since it “helps to protect [the borrower] as well as the lender against further house price falls”.

“On the other hand, it does mean that they may have to wait a bit longer before they can access mortgage finance if they haven’t already got substantial savings accumulated,” she added.

This entry was posted on Wednesday, January 14th, 2009 at 3:04 pm and is filed under Housing Market, Loans, Mortgages. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.