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Credit squeeze will 'tighten its grip'

3rd July 2008 | back to article listings BACK    print this article PRINT

Today the Bank of England (BoE) released its latest credit conditions report, with homeowners, first-time buyers and investors eagerly anticipating more promising news than has been forecast for the UK housing market of late. However, it seems that the credit crunch has not quite left the property scene yet, with gloomy predictions from the Bank suggesting that the availability of mortgages will not ease in the near future.

First-time buyers are hardly likely to have revelled in this news, but equally it may have been received well by landlords keen to get the most out of their rent-paying tenants. Professionals who would have once took the first step on the property ladder without the need of a deposit and enjoyed low fixed-rate deals are stuck in rented accommodation for the foreseeable future. This of course means that an increasing amount of would-be homeowners are seeking out the best lodgings they can find to sit out the current credit storm.

However, there are those that are calling for more action to be taken to address this problem. The Council of Mortgage Lenders has suggested that funding is needed in the wholesale mortgage category to boost lost confidence in the property market. Director general of the body Michael Coogan stated: "Neither the cost nor the availability of wholesale funds has improved for lenders since the BoE launched its special liquidity scheme, helpful though that scheme is. This means that cost and availability to customers has not improved either. And this in turn means that consumers are now beginning to give up and demand is falling, with confidence in the housing market falling with it."

Furthermore, the Royal Institution of Chartered Surveyors (Rics) stepped up the pressure to scrap stamp duty at the start of this week. It suggested a whole host of ideas that could soon be adapted by a rather unpopular government keen to make more well-liked decisions - although this hot potato of a topic is certainly one that has been called into question a number of times by housing organisations without much avail.

So while it may be likely that conditions could turn against investors if measures are brought in to improve the property markets for first-time buyers, at least landlords battling against higher mortgage costs can surely breathe a sigh of relief for the time being. Today's news means demand for rented accommodation is likely to increase rather than falter in coming months, if not longer. And the icing on the cake for buy-to-let investors? The Bank's survey threw up one surprise - the demand for this type of loan has increased over the last quarter. This is indeed another sign that this sector is enjoying a healthy period.

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