There is more choice for clients but this can’t hide the fact that the focus for lenders has moved to affordability
There are now twice as many products available as there were two years ago and that number seems likely to rise.
On the face of it, this is exciting news for first-time buyers who have had nowhere to turn during the past few years unless they had large deposits.
In the second half of 2010, tight lending criteria put downward pressure on house prices and led to record highs in rents. So has this all changed?
The average rental price in the UK has fallen for two consecutive months, buy-to-let investors are beginning to return to the market and several lenders have recently introduced 95% LTV products for first-time buyers. Mortgage lending, it would seem, is looking up.
While the number of products available has risen, their terms have changed markedly since the development of more stringent Treating Customers Fairly requirements.
The emphasis for lenders has moved towards responsible lending. This means affordability is the prime consideration and any assessment must include the repayment of the loan.
Gone are the days of high income multiples, self-cert and interest-only loans.
But simply withdrawing higher risk products isn’t enough to ensure that borrowers aren’t biting off more than they can chew.
Responsible lenders must not only exercise caution in the types of product they offer, but they must also take a proactive approach to assessing changing borrower circumstances.
Having the ability to predict when and where affordability problems may occur maximises the potential for a satisfactory resolution that avoids default and repossession, and allows lending decisions to be made with greater certainty.
Despite the rise in mortgage products, access to them remains restricted for many. The Council of Mortgage Lenders says providers still have to repay the £230bn lent to them by the Treasury and the Bank of England during the banking crisis of 2008 and 2009.
House prices, according to LSL/Acadametrics, have been falling for the past four consecutive months. The most recent figures from the CML show gross mortgage lending fell 13% in January.
Research by Lloyds Banking Group has shown that 9% of so-called second-steppers have been unable to move to a new home because of the depreciation of the value of their current properties.
Although lenders are offering large numbers of products it cannot disguise the fact that they have many reasons to be cautious in 2011.
The economic headwinds faced by the UK means lending criteria look set to remain relatively tight.
But there can be no doubt that a higher number of products gives borrowers much greater scope to search for a deal that works for them.
This is certainly a good thing because down the line, more carefully chosen mortgage products mean fewer defaults and repossessions.
But the elephants in the room remain restricted liquidity and tight lending criteria.
