Those looking to take out a mortgage in the UK are currently facing difficulties because of the freeze on approving mortgage that many of the lenders have in place. According to the Crosby Report, this freeze is expected to last for another two years. Sir James Crosby, the former chairman of HBOS, has informed government that new homeowners and those looking to refinance will still find it difficult to obtain mortgages as long as the credit crunch continues to plague the UK. The credit crunch has led to falling house prices and only those with excellent credit and income will qualify for new loans.

Treasury has asked Sir James to lead an inquiry into the wholesale mortgage market in an attempt to find a solution to the problem, but he says the problem is one for which there is no quick solution. A full report is expected in the Crosby Review, which is supposed to be released in the autumn of 2008.

In spite of Sir James’s comments and the government’s reaction with setting up a review committee, the Council of Mortgage Lenders has informed government that it does want and need a quick response to the problem. They want the government to move quickly so that a resolution can be found. They are afraid that if the current credit crunch continues for much longer it will have a devastating effect on the real estate and the mortgage industries.

It has been rumoured that the Chancellor, Alistair Darling, is about to initiate a substantial package consisting of about £40 million to back new mortgages. This is a short term solution to ease the strain banks are experiencing in not being able to approve new mortgages. It is quite possible that he may offer to swap new mortgages for bonds backed by the government in an attempt to get lenders to approve more mortgages and open up the lending market to more people.

The hope is that if this scheme does go through, the cost of borrowing money in a mortgage will become lower for homeowners. This is especially true for those buying a home for the first time who also face the prospect of having to come up with a substantial downpayment. Because they are new to the mortgage market, they often have to pay high rates of interest on the repayment of the loan.

In the past few months, the number of mortgages approved by UK lenders has reached an all-time low. With the decrease in prices of homes, this makes taking out a mortgage more attractive to new home buyers and this decrease doesn’t appear to be slowing down at any time in the near future. As the prices get lower, banks will once again start approving mortgages at a faster rate than they are doing at the present time.
For anyone who is considering taking out a mortgage, the best advice is to wait and see how things play out in the housing market.

Recent Additions:

• Interest rates for August remain on hold
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